Italian Finance Minister Vittorio Grilli is confident that euro-region finance chiefs will reach an agreement on aiding Greece when they meet next week.
Greece was granted an additional two years to reach budget- deficit goals in its bailout program. European finance ministers will be discussing ways of plugging the funding gap resulting from that extension at a Nov. 20 meeting in Brussels.
“We know that there are several options for helping Greece get through this very important challenge,” Grilli said in an interview with Bloomberg Television in London. “I am clearly optimistic that we can come to a decision.”
Granting Greece more time was the latest compromise in three years of crisis fighting, as creditors led by Germany opted to keep money flowing instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for countries left in it.
“With Greece, you have to be realistic on how much time they need,” Fitch Ratings Director Douglas Renwick told Francine Lacqua on Bloomberg Television’s “On the Move” in London today. “If you look at how much debt reduction they’ve done over the last three years, it’s actually been quite significant. They started from a very bad position.”
Grilli said that the International Monetary Fund remains involved in efforts to shore up Greece. IMF Managing Director Christine Lagarde took issue with a decision by euro chiefs to postpone the goal of getting Greece’s debt down to a “sustainable” level of 120 percent of gross domestic product by two years, until 2022, raising concerns that the fund might shy away from offering future aid to Greece.
Lagarde declined to predict the outcome of next week’s meeting when asked by reporters in Manila earlier, saying that “it’s not over until the fat lady sings, as they say.”
“Right now we are focused on finding together with the suggestions and advice of the IMF a solution,” Grilli said. “Then we will see.”
Grilli said that the euro region has taken “important, innovative steps” to solve the debt crisis and now has “credible tools” to pursue closer fiscal and political union.
“We are going through all the steps in Europe even if it looks like we are sluggish and behind the curve. I think we are addressing right now very important issues,” Grilli said. “And when we look back in a few years’ time, we will be ahead of the pack.”
On Italy, Grilli said that the government economic overhauls, which have deepened the country’s fourth recession since 2001, will produce results and he expects to see the economy start to recover in the second half of next year. The economy contracted 0.2 percent in the third quarter, less than the 0.5 percent forecast by economists surveyed by Bloomberg, a report showed yesterday.
“We have been prudent and we have been forecasting that the change in trend will occur next year, but if things happen earlier, we will be very glad,” he said.
Italian 10-year bonds gained for a fourth day, with the yield falling 2 basis points to 4.87 percent.
Italy will continue its efforts to reduce the euro-region’s second-biggest debt, currently more than 120 percent of GDP. The government is committed to a program of selling real-estate assets that could run into competition from similar efforts in Greece and Spain. Grilli has said that Italy can raise at least 5 billion euros ($6.4 billion) in the “short term” from property sales.
“We know that there is not exactly a big market right now,” he said. “We are structuring a multi-annual sale, probably a 10-year effort, not just direct sales of real-estate assets, but much more structured into proper funds. So, we have to think in a creative way. But I think there is a lot of room to be successful in this endeavor.”
Grilli also praised Spain’s efforts to tame its public finances and buoy its banks, which have been struggling under the weight of mounting loan defaults after the collapse of a decade-long real estate boom.
“Spain has been doing an amazing amount of work,” Grilli said. “They are now finalizing a program for their banking sector. I can only say that I am quite astonished at the effort that the Spanish people are putting into changing their country.”
To contact the reporters on this story: Francine Lacqua in London at firstname.lastname@example.org; Craig Stirling in London at email@example.com
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