Athens News Agency: News in English (PM), 98-03-15
NEWS IN ENGLISH
Athens, Greece, 15/03/1998 (ANA)
MAIN HEADLINES
- Greece joins ERM after drachma devaluation
- National Economy Minister announces ambitious economic measures
- Prime Minister: Devaluation will fortify drachma
- ERM negotiations began two months ago in 'utmost secrecy'
- Opposition parties' reactions to devaluation, ERM entry
- Weather
- Foreign exchange
NEWS IN DETAIL
Greece joins ERM after drachma devaluation
The Greek drachma was devalued by 14 percent on Saturday, enabling the
national currency to join the European Union's exchange rate mechanism
(ERM) currency grid, while a package of drastic economic measures including
partial privatisation of state utilities and banks and streamlining of
public transport and postal organisations was also announced.
The move and accompanying economic measures were lauded by the European
Union and the International Monetary Fund alike, but met with strong
criticism from the Greek opposition parties and labour unions.
The Greek government took financial markets by surprise on Friday when it
announced it had applied to immediately join the up to then 12-member ERM,
following a day of speculation in which the drachma fell sharply against
the ECU.
The EU's monetary committee comprising senior bank and finance ministry
officials, during a seven-hour meeting in Brussels on Saturday, accepted
the drachma into the ERM, effective immediately, and also approved an Irish
request for a 3 percent revaluation of the punt to put it back in line with
economic fundamentals.
The EU monetary committee set a central rate of 357 drachma to the European
Currency Unit (ECU) for the Greek currency's debut Monday on the ERM, the
grid the 15-nation bloc uses to ensure currency stability and a precursor
to the single currency which Greeks hopes to join in 2001.
Prime Minister Costas Simitis said in a televised address to the nation
Saturday night that the drachma devaluation and ERM entry were necessary
for Greece's membership in EU economic and monetary union (EMU), adding
that he wanted Greece to enter the euro-zone in 2001 at the rate chosen
earlier that day.
In Brussels, European Commission President Jacques Santer welcomed the move
saying that, combined with "ambitious" measures on public finances,
privatisation and labour market reforms, it would "contribute to the
credibility of Greek economic policy.
The EU monetary committee anticipated that the privatisation proposals
outlined over the weekend would yield 0.8-0.9 percent of Gross Domestic
Product per year on average.
According to monetary committee, "the incorporation of the drachma in the
ERM reflects the substantial economic progress Greece made over the past
few years and the commitment of the Greek authorities to the convergence
process"
"Membershiip of the ERM will provide an anchor to domestic policies which
will be firmly geared to keeping inflaction in check and on a downward
trend," it added.
In Washington, International Monetary Fund (IMF) managing director Michel
Camdessus on Sunday welcomed Greece's decision to join the ERM and the
European Monetary System (EMS).
"The drachma's new central exchange rate, and the supportive package
announced by the government, should provide a sustainable basis for the
government's commitment to join EMU as from 2001," Mr. Camdessus said in a
statement.
"I am encouraged by the (Greek) authorities' determination to support the
drachma's ERM entry through fiscal adjustments intended to realise the
Convergence Plan's targets, a forward-looking wages policy, measures to
enhance the efficiency of the labour market and a strengthened structural
reform effort," he added.
Following Greece's entry, Sweden and Britain remain the only two of the 15
EU member states outside the ERM.
National Economy Minister announces ambitious economic measures
National Economy Minister Yiannos Papantoniou at noon Sunday announced a
package of drastic economic measures as part of the deal struck with EU
monetary authorities Saturday for the drachma's entry into the European
Exchange Rate Mechanism (ERM), also involving a 14 per cent devaluation of
the national currency.
The package, feared likely to spark considerable social unrest, provides
for the partial privatisation of 11 public utilities and three or four
state-controlled banks in 1998 and 1999, with the state retaining minimum
51 per cent stakes. It also envisages the streamlining of other loss-making
utilities, such as the national carrier Olympic Airways, railways, urban
transport and the post-office.
Mr. Papantoniou said he would shortly be tabling a draft bill on changes in
the social security system, and announced measures for trimming public
deficits, as well as changes in labour market regulations affecting both
the private and public sectors.
The fiscal adjustment measures aim at reducing public sector deficits to
2.4 and 2.1 per cent of GDP in 1998 and 1999 respectively, Mr. Papantoniou
said. He stressed that the target of further bringing down inflation to 2.5
per cent by year end still stands, and urged employers and unions to adopt
the figure as a guideline in negotiations for collective labour agreements.
Finally, he expressed confidence that there would be no further speculative
pressures on the drachma, as the currency's new parities were considered
fully competitive.
Prime Minister: Devaluation will fortify drachma
Prime Minister Costas Simitis, in televised address to the nation Saturday
evening, said that the Greek currency's acceptance into the European
exchange rate mechanism (ERM) would lead the Greek economy to strong "self-
fueling" development.
Mr. Simitis said that would be possible due in part to the "increased
international confidence in (and) recognition of the prospect of the
country's entry in the final stage of European Monerary Union", which would
allow Greece to participate in the decision making processes.
Mr. Simitis urged the Greek people to display confidence in the course the
country has taken just as Greece's European partners had displayed their
confidence in the Greek economy with their decision to include the drachma
in the ERM.
Spain, Italy and Sweden realigned their currencies in the past, so Greece
was not the first to make such a move, the Prime Minister said.
Mr. Simitis also said that the "hard" drachma policies followed by the
government since 1994 had prepared the economy for this move.
The 14 per cent devaluation will "fortify the drachma and lead to lower
interest rates, a development which will reduce the national debt and lead
the economy to self-sustaining growth", he added.
ERM negotiations began two months ago in 'utmost secrecy'
Prime Minister Costas Simitis cut short a visit to London and returned to
Athens late Friday night to chair an urgent Cabinet meeting on Saturday
morning.
Optimism over the successful entry of the drachma into the Exchange Rate
Mechanism (ERM) of the European Monetary System (EMS) was expressed by
government sources at the end of the Cabinet meeting.
The same sources said that the negotiations for the ERM entry had commenced
two months ago, but "utmost secrecy" had been necessary to avoid unwanted
pressures on the Greek currency.
The recent US$1 billion loan raised by Greece had been planned independently
of ERM entry and was not connected to that decision, the sources added.
The sources said also dismissed runmours of early elections as "ludicrous".
Mr. Simitis cut short his visit to London, where he attended the European
Conference, while Foreign Minister Theodoros Pangalos remained to attend
Saturday's informal Council of Ministers meeting in Edinburgh.
The Premier left Sunday afternoon as scheduled, however, for an official
three-day visit to Prague.
Opposition parties' reactions to devaluation, ERM entry
The main opposition New Democracy party said in a statement on Saturday
that its forecasts for the drachma have been vindicated and added that the
governmental financial policies have failed.
ND Parliametary Group General Secretary Stavros Demas said "Mr. (Costas)
Simitis will go down in history as the prime minister of taxes and
devaluations."
ND Parliamentary Group Spokesman Dimitris Sioufas said that the Greek
people are called on to pay for the failed financial policies of the
Simitis government.
Former ND leader Miltiadis Evert questioned the reasons for the recent US$1
billion loan by the government for the fiscal defence of the drachma, which,
as he said, would cost the Greek people US$100 million.
The Communist Party of Greece (KKE) on Saturday described the government's
decision for ERM entry as "an extremely negative development of long
duration".
The victims of the government's policy would be the working class and less
well-off segments of the population, while those controlling large amounts
of domestic and foreign capital would benefit, along with the big hoteliers
and major exporters, it said.
A party announcement said the government would use devaluation "as a tool
for launching a fresh offensive on workers' rights, the social security
system and public utilities", and called on the Greek people to "clash with
the monopolies and their governments".
Coalition of the Left and Progress leader Nikos Konstantopoulos accused the
government of making a sudden about-face, after steadily supporting the
'hard drachma' policy.
Addressing the party's central committee on Saturday, he charged that
"certain people who had been informed of the impending devaluation took the
opportunity to profiteer from a position of safety, at the expense of the
national currency".
According to Mr. Konstantopoulos, the change in foreign exchange policy was
"tantamount to acknowledging that the course followed to date was a wrong
one".
In a related development, the General Confederation of Workers of Greece
(GSEE) representatives, meeting at Kavala for the organisation's 29th
conference, demanded of the government that it protect workers from the
repercussions of the drachma's devaluation.
GSEE President Christos Polyzogopoylos asked "for immediate measures so
that the end result (of the devalutation) will be positive."
WEATHER
Local storms are forecast for Monday in the Cyclades and Dodecanese islands
and Crete, while rain and sleet are expected in Thessaly, central Greece,
Evia, the Peloponnese and the islands of the Aegean. In Athens, cloud and
rain or sleet are expected in the northern and eastern parts of the
prefecture, with snow in the surrounding mountains and temperatures ranging
from 4-8 C. In Thessaloniki, partly cloudy with slight possibility of light
snowfall and temperatures of 2-5 C.
FOREIGN EXCHANGE
After Saturday's announcement of a drachma devaluation, the new foreign
exchange parities (Monday's opening) are as follows:
French franc 53.831 German mark 180.542
Italian lira (100) 18.236 Irish Punt 448.355
Belgian franc 8.753 Finnish mark 59.388
Dutch guilder 160.234 Danish kr. 47.331
Austrian sch. 25.661 Spanish peseta 2.122
Port. Escudo 1.761
(L.G.)
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