Brussels, 20/03/2014 (Agence Europe) - On Wednesday 19 March, the troika of lenders (European Commission, European Central Bank and International Monetary Fund) published a report on its fourth monitoring mission in Greece. It made an optimistic assessment of different sectors of the country's economy in the light of macroeconomic and budget targets for this year, but warns that vigilance is needed for the banking sector.
In a joint press release, the troika points out: “We take note of the stress test results and attendant capital needs estimates by the Bank of Greece. However, according to the assessment of the mission teams, there are upside risks to the capital needs estimates, in particular, if the authorities and banks do not urgently and efficiently address the high level of non-performing loans. Swift recapitalisation of banks will strengthen their balance sheets. The envisaged injection of fresh private capital into the Greek banks is a sign of confidence and will help to strengthen the private management of Greek banks. The Bank of Greece should remain vigilant in its oversight of the banking system and proceed forcefully in requiring banks to quickly work out their large stock of problem assets. The authorities are also committed to significantly strengthening the private sector debt resolution framework and facilitating the orderly and swift workout of impaired bank assets. The buffers in the Hellenic Financial Stability Fund will be retained to meet future adverse contingencies”.
The country is on track to meet its budget targets. Although the figures will not be officially released by Eurostat until the end of April, the troika says that the primary budget surplus for 2013 has been achieved with a substantial margin. The three troika institutions state: “Preliminary estimates suggest the 2013 primary balance target was met with a substantial margin. While only a small portion of this over-performance will carry over into 2014, we believe that the 2014 fiscal targets will also be met, taking into account the measures being implemented and planned. The authorities are committed to taking all necessary actions to ensure that banks remain healthy and adequately capitalised and are in a position to support the economic recovery”. The Greek government has promised to introduce policies to generate a primary budget surplus of 3% in 2015, although this will require the extension of a number of measures that have reached their expiry date, such as the solidarity tax.
The troika notes that the Greek government has promised to introduce most of the product market reforms recommended by the OECD, to liberalise the transport and lettings market and to relax the rules on closed professions. Labour market reforms are behind schedule, but the authorities are committed to implementing them gradually in the remainder of 2014. The troika adds that notwithstanding delays, progress is also being made in reforms of the public administration. The government is planning to kickstart the privatisation of a number of enterprises to generate income for the state.
In April, the Eurogroup will decide on figures and prior actions needed for the disbursement of the next few batches of aid. In theory, Greece will receive around €8 billion to cover bills that become due in May. Some €10.2 billion remains of the EFSF funding set aside for Greece. Ministers are expected to provide some clarity about financing of the Greek aid programme because the IMF requires visibility over twelve months. Greek newspapers say that the country is planning to issue five-year sovereign bonds in the first half of this year.
Greek Prime Minister Antonis Samaras said the outcome of the mission demonstrated the improvement in the Greek situation over the past 20 months. On the fringes of the tripartite social summit on Thursday 20 March, he said Greece had achieved its fundamental budget targets and implemented crucial reforms that had made the economy more competitive. He explained that Greece has primary budget surpluses and has made the biggest budget adjustments over a very short period of time. It has an ambitious programme of structural reform that has helped it get rid of its current account deficit for the first time in 48 years, and it is now stabilising its social cohesion problems and responding to the most urgent problems, he added. Samaras said that the Greek government would use the primary budget surplus (not including debt-servicing costs) to try to help those worst affected by the crisis and would be spending €525 million from the 2013 budget surplus to this end. (EL with LC)