Fin24

France backs more time for Greece

2012-09-23 17:36

Paris - Greece should be allowed more time to meet deficit targets set by international lenders provided it is sincere about reforming its economy, French Prime Minister Jean-Marc Ayrault said on Sunday.

Near-bankrupt Greece needs the European Union and International Monetary Fund’s blessing on spending cuts worth nearly €12bn ($16bn) to unlock its next tranche of aid, without which it faces default and a potential exit from the euro zone.

“The answer must not be a Greek exit from the euro zone,” Ayrault said in an interview with news website Mediapart. “We can already offer it more time... on the condition that Greece is sincere in its commitment to reform, especially fiscal reform.”

Tough fiscal medicine prescribed by Greece’s international lenders has provoked widespread popular anger there that forms part of a broader backlash - spearheaded by French President Francois Hollande - against German-led austerity measures across Europe.

So far, Greek officials have said agreement on €9.5bn of the €11.5bn package of spending cuts had been reached.

That includes €6.5bn in cuts to wages, pensions and benefit payments and a further €1.1bn in savings planned from an increase in the retirement age.

Responding to doubts over Hollande’s ability to deliver on his pro-growth, anti-austerity platform, Ayrault told Mediapart that a planned €120bn ($155.87bn) European Union stimulus package for the bloc as a whole was one of his successes - but that even this should only be a first step.

"We need to go further...120bn is not enough,” he said. “But it is better than nothing.”

A poll released earlier on Sunday showed that Hollande’s approval ratings had tumbled to their lowest level since he took office in May, reflecting French impatience with his perceived inability to fight the crisis and stop job cuts.

At a European level, the European Central Bank could do more to help growth, added Ayrault. “We would like to see (the ECB) go further...in playing the role of a real central bank,” he said.

The ECB has over the past year brought out extra firepower in a bid to calm financial markets and spur growth in Europe, including the issuance of some €1 trillion in cheap funds to the banking sector and its recent announcement of a government-bond purchase programme.

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