P. Moscovici: Staff-level agreement before December 5 is ‘doable’ and crucial

Reaching a staff-level agreement for concluding the second review of Greece’s programme before the December 5 Eurogroup is crucial so that a discussion on Greece’s debt can begin and the efforts over the years of crisis can come to fruition, European Commissioner for Economic and Financial Affairs Pierre Moscovici said in Athens on Monday.

“My guess, my take, is that we are not so far away from this. That its doable. That we can make it and that you can have a deal with all parties around the table, Moscovici said while delivering the keynote address to the 27th annual ‘The Greek Economy’ Conference “Greece and the Global Disruptive Environment: A look into the future” organised by the American-Hellenic Chamber of Commerce.

He also underlined the need for the International Monetary Fund (IMF) to stay on board as a guarantee to stability.
Throughout his speech, Moscovici also emphasised the social welfare elements of the programme and the need to “make sure that even those hardest hit during the crisis can again participate in sustainable and inclusive economic growth here in Greece.”

He noted that there were two key goals, both of which were essential: firstly to improve the business environment and competitiveness, to increase investment in Greece and deliver economic growth, and secondly to integrate a social welfare system that is targeted, consistent and efficient.

“This is what is required to support a robust economic recovery and a better, more stable future for the Greek people,” the Commissioner said, offering assurances to Greek people that there was finally a “light at the end of the tunnel.”

“A shift is now clearly observable and I am glad to be able to make this observation that wouldn’t have been possible a few years ago when I started sitting on the Eurogroup as France’s finance minister,” he pointed out, citing recent upbeat forecasts for a return to 2.7 pct growth in 2017 and “encouraging signs” from the labour market.

At the same time, Moscovici underline that Greece must continue and complete reforms so that the efforts “were not for nothing”.

“There can be no backtracking, no going back to the unsustainable policies and practices of the pre-crisis period. Nobody must have any nostalgia for that period,” he said.

He admitted, however, that a 24 pct employment rate, while an improvement, was no cause for satisfaction and that “downside risks remain”.

“People here, as in many other parts of Europe and the world, do not feel they have and they are likely beneficiaries in the potential upside. We must always keep in mind that there are some Greek citizens, French citizens, American citizens, who feel that they are ‘forgotten’ by the political system and feel as if they are losers in globalisation,” Moscovici admitted.

According to the Commissioner, there were four elements needed to support those hardest hit and ensure Greece’s prosperity and economic stability in the long run: inclusive growth that ‘left no one behind’, a fair tax system that ensured everyone paid his or her fair share, “ownership” of reforms across the political spectrum and Greece once again becoming an active participant in its European future.

“That is the ultimate target for us all,” Moscovici added, “I never accepted that there could be something like a Grexit. But I wanted more than that, I want a stable Greece, a strong Greece, to be a strong partner in a democratic Europe. Here we are in the birthplace of democracy where culture had its peak and this is a country that must be at the core of Europe not at its fringe.”

He also noted that the feeling of exclusion from the benefits of growth was not unique to Greece and its “electoral translation” had led to a populist rise all across western soceities. He said this was particularly valid in Greece’s case and emphasised the need for an efficient social welfare system.

“We have to pre-empt people’s legitimate concerns and to ensure that economic growth is inclusive. To that end, a strong social welfare system, combined with education, culture, with training opportunities is essential. To ensure that all can participate in building Greece’s future, we have to render the system both effective and sustainable.

Greece’s future is at stake; the first without the second means only those in a position to benefit today will benefit while future generations will be left to fend for themselves. This is not acceptable and that does not reflect the European social model and the European social model must be implemented in this country,” he said.

As a key part of the effort he identified the national roll-out of the social solidarity income programme, pointing out that this was a key part of the second review programme, and highlighted the social welfare review undertaken with the World Bank to improve targeting and efficiency. Potential reforms, he added, may include improvements to family and disability benefits and also to health care, as a step to ensuring universal access and a system that is affordable.

Weaknesses in the labour market were another area highlighted by the Commissioner, who pointed out that labour laws “need to facilitate job creation as well as job security.” “This is an equilibrium that is challenging to find in post-crisis economies, he said and also urged investors to take advantage of Greece’s “abundant and skilled human capital.”

Moscovici highlighted the great progress made by Greece is reforming its tax system: “Since july 2015 Greece has undertaken a substantial set of tax reforms, including restructuring of the relevant authorities. These reforms are intended to facilitate and improve tax compliance and collection, to extend the tax base so that not only a few pay while many benefit, simplify complexities and mitigate administrative burdens and overlap,” he said.

Such policies are not only in line with European best practices but also fully coherent with the current global push to see individuals and corporations pay their fair share, he added.

Moscovici particularly emphasised the need for Greece to now complete a growth and investment strategy that sets out a vision for the next two or three years.

“As we near the prospect of closing the second review of the ESM programme I would encourage the authorities, and I did this afternoon, to start thinking about what comes afterwards and how to prepare the ground from now,” he said.

“Taking a perspective beyond the programme period is key to foster confidence in continued policy delivery and to deliver and develop a credible and well-supportive growth narrative for Greece. To be very frank, we still expect that. We need that. And that’s what needs to be reinforced now. Stability, predictability over a long-term horizon, long enough to generate the benefits that have started to emerge and which we see as possible,” he said.

He emphasised that Greece’s place remained in Europe, and also its geopolitical role, on the front line of the refugee crisis, and its “strategically important” and “complicated” relationship with Turkey. “This gives you also the right to speak strongly about the future of Europe, not just about its past,” he said.

“We are a few days ahead of a very important Eurogroup meeting, on the 5th of December…to me this must be opening of a sequence that needs to lead to what I call a global deal about the Greek programme. In my view that means completing a virtuous circle, where reforms are led, which leads to confidence, which also leads to a coming back of investors, foreign direct investors and Greek investors but also European investors in this country. Jumped growth.”

And this is why it is so important that we are capable of reaching a staff-level agreement before the 5th of December, so that there is a sequence that is open that can lead us also to examine positively the question of debt, debt reprofiling before the end of this year. Also for that, we need to have a successful completion of the second review.”