Dijsselbloem: The key issue for Greece is restoring confidence in the country

The labour market reforms adopted by Greece had brought “clear improvements” that were reflected in the latest unemployment figures in the country, outgoing Eurogroup chief Jeroen Dijsselbloem suggested on Thursday, during an exchange of views on Greece in the European Parliament’s Employment and Social Affairs Committee.

The key issue issue for Greece now was to restore confidence in the country and its economy, he said, adding that a swift and smooth conclusion of the third review would go a long way toward feeding into this confidence and bringing about a return of investments.

The outgoing Eurogroup president said that Greece has implemented a great many labour market reforms as part of its programme, which sought to increase the competitiveness of the Greek economy by making the labour market more flexible and correcting imbalances.

“Labour market reform is a delicate balancing act, particularly in the context of a fragile economy. On the one hand there is the crucial issue of respect of workers’ social rights, on the other hand there is the need to preserve flexibility and improve the relative attractiveness of labour as a production factor.”

The reforms carried out in Greece until now were “a good compromise,” Dijsselbloem added.

On the issue of collective bargaining, he said these had been frozen to “correct” imbalances caused by excessive wage hikes after the introduction of the euro but agreed that restoring them was now a priority, saying that this would happen at the end of the programme in the summer of next year.

Referring to the programme as a whole, the outgoing Eurogroup president said the economic situation in Greece had improved as a result of the reforms and stressed the need to conclude the third review on time, while appearing confident that a staff-level agreement have be achieved before the end of the year, so that the next disbursement of loans to Greece can be approved at the start of 2018.

A downward revision of Greek growth rates in 2017 was due to the delay in concluding the second review, he said, but a swift conclusion of the third review will significantly boost confidence and enable growth rates as high as 2.5 pct of GDP in 2018.

“In August we come to the end of the programme and from then Greece stands again fully on its own feet, not just financially but also in policy terms…I hope that there will be such strong effects by then in terms of growth and improvement that the motivation to continue what has been done will be strong,” he said.

“If there are, again, adverse shocks or underperforming of growth in Greece, we stand ready to do more to alleviate the Greek debt issue. Work on that mechanism, which is going to be very important in coming decades, will start at the beginning of the year and hopefully then we will go toward the exit of the programme,” he added.

Replying to Greek Laiki Enotita MEP Nikos Chountis, who asked if he agrees with Olli Rehn that Greece’s first programme was decided to support the banks, Dijsselbloem noted that “banks were the biggest problem in all countries” at the start of the crisis.

“We had a banking crisis, a fiscal crisis and we spent lot of the tax-payers’ money – in the wrong way, in my opinion – to save the banks so that the people criticising us and saying that everything was being done for the benefit of the banks were to some extent right,” he said.

This was the reason for banking union and the introduction of higher standards, better supervision and a reform and rescue framework when banks have losses, he added. “Precisely so that we don’t find ourselves in that situation again.”