Greece is no Ireland, says banking group as bailout stalls

 

By Denise Roland 3:51PM GMT 14 Mar 2013

Debt-laden Greece was set unachievable fiscal targets, unlike Ireland, said a leading global banking group, as the island's troika of international lenders delayed its next tranche of bailout cash.

Some analysts argue that a new write-down of Greek debt will be necessary to make Athens' burden sustainable, this time targeting bonds held by the ECB. Photo: EPA

The Institute of International Finance (IIF) has called for more money to be poured into Greece for it to emulate Ireland's success, warning that a failure to do so would end up costing more.

Its caution came as talks between Greece and its troika of international creditors - the EU, European Central Bank and International Monetary Fund - were put on hold due to "outstanding issues", largely around clashes over civil service job cuts.

Approval from the troika, who will resume talks with Athens in early April, will be needed to release a further €2.8bn to the troubled economy, originally scheduled for the end of March. Despite the delay, Yannis Stournaras, Greek Finance Minister, said he considered the loan tranche as "secure".

While in Ireland "consolidation measures have been painful but more manageable politically and socially", the targets set for Greece "were not achievable", said Jeffrey Anderson, senior European director for the IIF in a research note.

"Applying the Irish example in Greece to help restart growth would require some additional funding," he said, adding that the final cost "would be much less than might eventually be needed if [Greek] output continues to fall and doubts about debt sustainability remain entrenched."

Ireland, which received an €85bn bailout in 2010, is hailed as a European success story, triumphantly storming back to the long-term bond markets on Wednesday having endured a fiscal squeeze of 16pc and stabilising its debts. It hopes to be the first euro zone nation to exit a bailout by the end of this year.

Meanwhile the Greek economy, while comparable in size to Ireland's, got a bailout nearly three times the size at €240bn, as well as €100bn in cancelled debt from private creditors.

There are still concerns about the sustainability of Greece's debt, however.

While the public deficit is forecast to fall to 4.3pc of GDP this year, the Greek economy contracted last year by 6.4pc.

Some analysts argue that a new write-down of Greek debt will be necessary to make Athens' burden sustainable, this time targeting bonds held by the ECB.

The IMF has voiced support for such a move, while the ECB has repeatedly ruled it out.

Greece is no Ireland, says banking group as bailout stalls - Telegraph