Regling says Greece will likely not need the full remaining ESM funds

Greece will probably not need the full remaining funds available by the European Stability Mechanism (ESM), its head Klaus Regling said in a lecture on”Germany, Greece and the euro” delivered at documenta14, in Kassel, on Saturday.

“The ESM programs runs until August 2018, but I do not expect that the country will need the total remaining funds of around 46 billion euros in that period. And that means we’ll probably stay clearly below the program maximum,” he said.

said ESM has disbursed around 39 billion euros to Greece since August 2015 out of a total program of up to 86 billion euros. From the beginning of the first program in 2010, the total now stands at 181 billion euros.

He also tackled the notion that Greece has not implemented any reforms since the beginning of the crisis.

“Particularly in Germany, I hear over and over again that nothing has happened in Greece in the past years. This is an unacceptable distortion of the facts, and an insult to the Greek people, who have had to accept cuts in wages, salaries, and pensions that would have been unimaginable in Germany,” he said.

“So let me stress that Greece has made considerable progress. The budget trajectory is particularly noteworthy. In 2009, the budget deficit was more than 15 pct of Gross Domestic Product (GDP). In 2016, Greece had achieved a budget surplus of 0.7 percent. Only Germany and three other EU countries had a surplus that was somewhat higher. Such a consolidation success would have been impossible without fundamental reforms. Germany should value and respect that,” he added.

Regling also mentioned the reforms in the public administration – which now employs a quarter fewer staff- in the pension system, the labour market, and the banking sector which were among the most important structural reforms in Greece during the EFSF and ESM programs.

The ESM head also responded to critics of the bailouts who argue that Greece”has fallen victim to a neocolonial attitude of its creditors”.

Regling described this view as “superficial and wrong”, adding he strongly rejects it. “Yes, the necessary reforms had a high social cost. They caused substantial losses for many people in Greece, and a lot of pain. But the question is what alternatives were there for a country that investors no longer wanted to lend money to,” he continued.

“Greece had very high reform needs in 2008. At the start of the crisis, it became clear that Greek average income had risen by too much in the decade before the crisis. It had almost doubled. That was the highest increase of all euro area countries, and wasn’t supported by a comparable increase in productivity. And so, Greece lost competitiveness. The budget and current account deficits became unsustainable and needed to be corrected,” he explained.