Brussels, 05/08/2010 (Agence Europe) -The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) are pleased with the efforts made by the Greek authorities towards the support plan for the country's economy, consisting of €110 billion over three years (EUROPE 10131). The joint mission of the three institutions, which went to Athens on 26 July- 5 August, made this evaluation on 5 August. The Commission travelled to Greece to carry out an assessment of the country's economic performance, in compliance with the year multi-annual economic programme negotiated in May. At that time, Eurozone member states made a commitment to provide Greece with bilateral loans worth €80 billion, €30 billion of which would be for the first year (the IMF would provide the rest, €30 billion). Payments from the fund must, however, be made in compliance with the commitments made by the Greek government and which are evaluated in quarterly reports.
The result of this first periodic analysis is therefore positive. A joint press release explains that, “our overall assessment is that the programme has made a strong start”. The press statement also explains that, “the end-June quantitative performance criteria have all been met, led by a vigorous implementation of the fiscal programme, and important reforms are ahead of schedule”. Nonetheless, reforms must still continue because, “important challenges and risks remain”.
The contraction in the economy is in line with program projections: GDP is expected to decline by 4% in 2010 and around 2.5% 2011, according to forecasts by the experts; inflation remains above predicted levels due to a rise in indirect taxation (it is expected to reach 4.75% in 2010 but is expected to rapidly decrease).
General satisfaction with the budgetary level. The authorities have cut spending and the objectives on the deficit have been achieved. The experts explain that for the future, it will be essential to improve the control and monitoring of expenditure, particularly at the sub-national level, as well as strengthening fiscal governance as a means of reducing tax evasion by the wealthiest members of society.
A meticulous monitoring of the financial sector will be important and the €10 billion earmarked out of the €110 billion for stabilising the banking sector (by strengthening the capital of the Greek banks, if necessary) should be adequate.
Structural reforms: “impressive progress” has been made. Pension and labour market reforms are on the right track and reforms on the budget and the tax system are “key” to consolidating public finances. Other forms are planned, particularly in the transport and energy fields. This is the area where the main difficulty for the authorities of the country is located, given the social tension that these changes can generate. The press release explains that, “the challenge facing the government in this regard will be to overcome resistance from entrenched vested interests to opening-up of closed professions, deregulation, implementation of the services directive, and elimination of barriers to development of tourism and retail”. It also points out that, “the key challenge facing the Greek authorities remains to establish a strong track record of policy implementation”.
The Commission, Eurogroup and the IMF must now give their opinion on the mission's report. Once this report is approved, the next tranche of assistance can be released. A payment of €9 billion (€6.5 by the Eurozone and €2.5 billion by the IMF) should be made in September. Another evaluation mission is expected to be sent to Athens in October. (A.B.)