GREECE’S REFORM programme is still “broadly on track” but another round of structural measures is needed to cultivate a sustained recovery, according to a monitoring mission from the European Union and International Monetary Fund (IMF).
“The programme has reached a critical juncture,” the “troika” mission – representatives of the European Commission, the European Central Bank and the IMF – said yesterday.
While Greece would miss its 2010 deficit target, the country had made enough of an effort to qualify for the next, €9 billion instalment of its loan.
The troika was ending a 10-day mission to Athens to check compliance with the terms of the country’s €110 billion bailout package.
It warned that further structural reforms – opening up “closed-shop” professions, simplifying administrative procedures and modernising collective wage bargaining – required “skilful design and political resolve to overcome entrenched interests”.
The European Union-IMF bailout in May averted a sovereign default but imposed rigorous measures, including 15-20 per cent cuts in public sector wages and pensions.
Greece faces a third successive year of recession with the economy projected to contract 3 per cent in 2011 on top of 4.2 per cent contraction this year.
The troika praised the government for achieving an “impressive” reduction in the budget deficit of six percentage points of gross domestic product to 9.5 per cent of gross domestic product (GDP) this year.
It warned that an extra effort will be required to meet next year’s deficit target of 7.5 per cent of GDP, to be achieved by cutting wasteful spending in healthcare, at state corporations and through more efficient tax collection.
Poul Thomsen, a senior IMF official heading the mission, said he was confident that Greece could resume borrowing on international financial markets before the bailout programme ends in 2013.
He gave reassurances that Greece would receive further assistance if necessary, as the country will have to fund a “hump” of maturing debt in 2014 and 2015.
“We could provide part of the funding on a longer repayment period, or give a follow-up loan,” Mr Thomsen said.
Supplementary help for Greece could involve extending repayment of the loans beyond 2013 or providing fresh loans to refinance them, he said.
Minister for finance George Papaconstantinou has said the country’s prime funding crunch could come in 2014 and 2015. – Copyright The Financial Times Limited 2010/Reuters
