Greece must surprise markets by greater improvements to its troubled economy than it has already promised if it is to pull itself out of its severe financial crisis, the governor of the Bank of Greece said on Tuesday.
The government is implementing harsh austerity measures designed to trim the debt-ridden country's massive budget deficit, which stands at 13.6 per cent of the Gross Domestic Product (GDP), and has called on a euro45 billion joint eurozone and International Monetary Fund (IMF) rescue package for aid.
"In order to bring about a definitive reversal of the negative trends, we must surpass ourselves and favourably surprise the markets, by achieving even greater improvements than the ones projected," Bank of Greece Governor George Provopoulos said in presenting his annual report on the Greek economy.
Reducing the deficit this year by even more than the targeted 5 percentage points will be "of crucial importance for the overall economic climate," he said.
"The Greek economy is in the midst of a deep, structural and multifaceted crisis. The exit from this crisis will therefore require a multi-annual, persistent and systematic effort," Provopoulos said. "It will require a break with the past."
Athens has faced ever increasing borrowing costs despite calling for the three-year eurozone-IMF rescue.
Markets are still concerned that Greece will be unable to service its debts in the long term and the details of the rescue package still need to be worked out, while Germany, which would be the largest contributor of loans, has called for more austerity measures before it pushes the issue through its parliament for approval.
A key indicator, the interest rate gap, or spread, between Greek and benchmark German 10-year bonds trading on financial markets, spiked to new highs of 6.6 percentage points at one point early Tuesday afternoon.
Athens needs a first batch of money from the rescue to come through by mid-May, as it has euro 8.5 billion of a 10-year bond maturing on May 19.
"Our problems are very large and our need for support is not only about getting past the barrier of May 19," Finance Minister George Papaconstantinou said in Parliament late Monday. "It is about persuading the markets that Greece can deal with its debt in the medium term."
He said the aid program should help Greece through the storm, as the country will "not require immediate access to the markets until the situation calms down."
Over the next three years, Papaconstantinou said, Greece will have to refinance about half of its entire euro 300 billion debt, and funds will be available by borrowing simultaneously from the market and the rescue.
Civil servants, already hit by cost-cutting measures, will hold a rally in central Athens later Tuesday to protest the rescue plan, fearing further austerity. The capital's public transport workers have started a six-hour work stoppage.