The completion of the second review of Greece’s programme is at a critical stage and must proceed without delay “in order to underpin the progress we have seen in the last 18 months,” European Commission Vice President Valdis Dombrovskis told a plenary session of the European Parliament on Tuesday, opening a debate on Greece.
“A staff level agreement should be within reach provided that all partners work actively towards bridging the remaining gaps,” he added, noting that reforms in Greece were continuing and many prior actions required for the second review were close to adoption.
Reporting significant structural changes across all areas of Greece’s economy, Dombrovskis especially highlighted progress in the establishment of an independent revenue agency and “the operationalisation of the new privatisation and investment fund, to name just two examples of big undertakings.”
“Economic data now point to several positive points. Growth returned in the second half of the past year and is gathering pace. Indeed Greece has outperformed expectations in terms of GDP growth for 2016 and is expected to grow strongly this year by 2.7 pct, assuming of course that the programme remains on track,” he said, adding that this was reflected in the European Commission’s winter forecast published on Monday.
Unemployment, while decreasing, remained “unacceptably high” and was one challenge that must be closely monitored and addressed, he added.
Dombrovskis noted that Greece was estimated to substantially surpass its 2016 primary surplus target of 0.5 pct of GDP and was thus on track to meet its 2017 fiscal target primary surplus of 1.75 pct of GDP.
“This represents strong progress and shows that Greece has come a long way,” he emphasised, while noting that implementation had always been the “Achilles’ heel” of the Greek programmes and warning that there was no room for complacency.
He also pointed out, however, that Greek authorities had shown consistency under the ESM programme and adopted nearly 200 measures and sub-measures to comply with reform commitments since the August 2015 agreement. “This effort needs to be recognised,” Dombrovskis said, pointing out that Greek authorities passed several important pieces of legislation through Parliament in November and December and that technical work necessary for the finalisation of the remaining elements has continued.
“Our structural reform support service has furthermore provided technical support in the design and implementation of many of these reforms, for example, in the areas of public administration, renewable energy, privatisation, revenue administration, bank governance and others. In general, cooperation with the Greek authorities has been constructive. With this in mind, it is crucial that all partners now live up to their commitments so that an overall policy package can be reached as soon as possible,” he said.
“This is not the time to call our resolve into question or jeopardise the positive economic signals but to underpin confidence and help jobs, growth and investment to return to Greece,” the Commission’s vice-president added. He noted that the overall package should encompass programme conditionality, “including with a view to the IMF coming on board with an arrangement,” and said the Commission will continue to work constructively “and urge our partners to do the same.”
Dombrovskis also referred to the short-term debt relief measures approved by the ESM in December, noting that these “contribute significantly to contain growth financing needs and smooth the Greek debt obligation over the maturity horizon, but they are part of the broader package agreed in May 2016 whose further elaboration we will continue to support in line with the agreement reached.”
“The Commission will continue to work actively and constructively to ensure that the second review is concluded as soon as possible and that a balanced agreement is reached,” Dombrovskis concluding, urging all the parties involved to “show political will.” “By keeping the programme on track, we will help to build on the current economic recovery in Greece, allowing it to return to sustainable growth and job creation,” he said.