Greek PM rejects debt restructuring

Reuters

ATHENS (Reuters) - Prime Minister George Papandreou ruled out a restructuring of Greece's debt but declined to comment whether a softer "reprofiling" was on the cards, the state-run Athens news Agency (ANA) reported on Saturday.

One year into its European Union/International Monetary Fund bailout, Greece is struggling with weak revenues and a deep recession, fuelling speculation that it will have to restructure its debt to pull itself out of the fiscal mess that triggered a euro zone crisis.

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"Debt restructuring is not under discussion," Papandreou said in an interview in Sunday newspaper Ethnos, ANA said.

Asked, however, to comment on whether a debt "reprofiling" was being considered, ANA quoted Papandreou as saying that the government "does not join the public discussion about such scenarios."

The chairman of the 17-country Eurogroup Jean-Claude Juncker acknowledged on Tuesday Greece may have to move toward a "soft restructuring" of its debt [ID:nLDE74G0PD], although the European Central Bank remains strongly opposed to such a move.

Papandreou's comments come two days before a crucial cabinet meeting to discuss a new fiscal consolidation plan, which must be convincing enough for the EU and the IMF to continue bankrolling his debt-laden country.

Greece is considering deeper cuts in public sector wages and further tax increases on a range of products and professions to qualify for more aid, Greek newspapers said on Saturday.

The plan may include scrapping bonuses to civil servants and employees in state-run companies, Greek newspapers Ta Nea and Isotimia reported, without citing any sources.

The government may also lower or scrap tax-free thresholds on property holdings and the self-employed, raise consumption taxes on soft drinks and certain fuel types or shift a range of products to a higher VAT-bracket, other newspapers said.

Greece is under pressure from its creditors for more budget cuts and quicker privatizations, after disappointing budget figures for January-April suggested it will miss the deficit targets set under its bailout program for a second consecutive year in 2011.

Papandreou admitted in the interview that talks with the inspectors have been "difficult" and vowed to take any measure necessary for Greece to qualify for the next, 12 billion euro tranche of the bailout loans.

"This (failure to secure the tranche) would most probably mean bankruptcy," Papandreou was quoted by ANA as saying. "We can't permit the creation of lobbies in Europe and elsewhere... which want to push Greece to default and out of the euro zone.."

Papandreou pledged to speed up and specify a 50-billion euro privatization plan announced last month, a key element in the country's effort to exit its crisis without restructuring.

The government would eliminate its holdings in companies which do not manage public goods or vital grids, like water and energy utilities, Papandreou said according to ANA.

(Reporting by Harry Papachristou)