Monday, 23 July 2012 - 04:45
Greek Program Extension Would Cost Up To €40 Billion
ATHENS--Granting a two-year extension of Greece's deficit-cutting program would cost the country's European and international creditors as much as €40 billion euros extra, a Greek newspaper reports Sunday, twice the amount of previous government estimates.
According to the Kathimerini newspaper, the widening estimate stems from bigger than previously expected shortfalls in Greece's budget position, and rising capital needs for Greek banks.
Greece's three-way coalition government, elected June 17, has been pushing for a two-year extension--until 2016--to implement the budget cuts and reform targets of the country's latest 173 billion euro bailout that was agreed with euro zone partners and the International Monetary Fund earlier this year.
The government argues that a deeper-than-forecast recession, now in its fifth year, has hammered revenue and forced greater-than-expected outlays for social spending, such as for pensions and unemployment benefits. It estimates that it will need a further 16 billion to 20 billion euros from creditors to cover its financing needs for an additional two years.
But with Greece lagging on many of its reform targets to date, there is little support for such an extension in other European capitals.
Without citing sources, the newspaper says that initial estimates done by the Greece's troika of international inspectors--from the IMF, European Commission and European Central Bank--and in conjunction with Greek and euro zone officials, estimate that the cost of a two year extension will be between 30 billion and 40 billion euros.
It cites a wider budget deficit this year, lower privatization proceeds after Greece's asset sales program was stalled by back-to-back elections, and estimates that the current 50 billion euro program to recapitalize Greek banks may not be enough.
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(END) Dow Jones Newswires
July 22, 2012 21:45 ET (01:45 GMT)
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