Greek official claims deal with lenders curbs prospects of more austerity

A Greek government official sought to emphasize the positive aspects of a deal between Greece and its creditors reached on Tuesday, claiming that it reduced the prospect of further austerity.

"The deal has reduced Greece’s obligations as regards primary surpluses over the next three years by 11 percent of  GDP, the official said, claiming that Greece would avoid austerity measures worth around 20 billion euros over that period.

Greece is expected to record a primary deficit of 0.25 percent of gross domestic product this year, followed by primary surpluses of 0.5 percent next year, 1.75 percent in 2017 and 3.5 percent in 2018. Practically this means that there will be no fiscal burden, that is to say no new measures, in the forthcoming period, he said.

The agreement foresees not only the refinancing of Greece's debt until the first six months of 2018 but also enough funding to repay state arrears so fresh money can enter the market and revive businesses, the official said. No mention was made of the debt relief Prime Minister Alexis Tsipras has sought.

Greece's cash-strapped banks will be recapitalized until end of 2015 and will be "immediately boosted with at least 10 billion euros," he said. "In view of this, there is no longer any risk whatsoever of a haircut to deposits," the official said, citing a European Commission directive for the recapitalization of banks that comes into effect in January.

The official said the government did not accept that non-performing loans should be sold to companies, as proposed by creditors, and referred to legislation which protects first homes from foreclosures until the end of 2015. In the fall, there will be government initiatives to deal with issue definitively to the extent that this can be done in a “market” worth 95 billion euros, he said.

The measures foreseen in the current agreement are "the same, with several improvements, however, as the ones foreseen in the agreement by the New Democracy-PASOK government which was not implemented." In that agreement, the government had been obliged to enforce those measures to complete the fifth review and secure 4 billion euros in funding, the official said.

The same measures, more or less, returned in the proposal submitted by creditors at the Eurogroup meeting of June 25 accompanied by a five-month extension of the program and 7 billion euros in funding, the official said, adding that "today, with the same measures, but with significant improvements, following the negotiations, the country has secured the covering of its loan obligations and of state arrears, with funding of around 85 billion euros."

On the issue of a contentious privatization fund, the official said that it foresaw the "exploitation," not sale of state assets.