Greece has met all of its targets under the austerity plan laid out for it by the European Union and International Monetary Fund, and should receive its next tranche of financial aid as scheduled, pending final reviews, the EU, IMF and European Central Bank said in a joint statement Thursday.
Greece has met all of its targets under the austerity plan laid out for
it by the European Union and International Monetary Fund, and should receive
its next tranche of financial aid as scheduled, pending final reviews, the EU,
IMF and European Central Bank said in a joint statement Thursday.
"
Greece
has
made a good start on the program having acted vigorously and ahead of schedule
in some aspects," said Servaas Deroose, Deputy Director General of
Economic and Financial Affairs for the EU, at a press conference in
Athens
.
As reported,
Greece
is
due to receive a second tranche of EUR9 billion in October, under the EUR110
billion aid package agreed in May. The IMF is due to provide EUR2.5 billion,
with the member states of the euro zone providing the rest.
"The staff-level agreement reached with the Greek authorities will pave
the way for the conclusion of the first review under the loan facility
agreement and stand-by arrangement, subject to approval by the Commission, the
Eurogroup, and the IMF's management and executive board," said the joint
statement from the EU, IMF and ECB.
The three reviewing parties said that the Greek economy had developed largely
in line with their expectations since May, and reaffirmed their forecast of a
4% contraction in gross domestic product there this year, followed by another
2.5% contraction next year. They revised up their forecast for inflation this
year to 4.75% due to increases in indirect taxes but said it would
"decline rapidly" in the absence of second-round effects.
They also sounded a relaxed note on the health of the banking system, saying
the decline in its capital adequacy was only "moderate," and that the
rise in bad loans was in line with expectations.
The ECB representative said at the press conference that the central bank was
pleased the government had started a review of public-sector banks as well as
the fact that it was conducting due diligence. "We welcome the move for
the strategic review and we also want to continue to see the government guaranteeing
local bank issued bonds that can be used as collateral with the ECB or the
Eurosystem so they have ample liquidity," said Klaus Masuch, ECB Head of
EU countries.
The delegation said that the basic strategy underpinning the support program
was to give the Greek government time to build a good track record before
returning to the markets.
"Markets understand the reforms are serious but it needs to be a sustained
period of implementation. Spreads will then eventually come down. But we don't
expect any return the markets very soon, said Poul Thomsen, the IMF's Greece
Mission Chief, at the press conference.
The delegation said they expect Greek budget revenue to accelerate in the
second half of the year as more of the government's indirect tax increases come
into effect, enabling targets to be met by the end of the year.
"We did not discuss any new measures only the implementation of those
already agreed," said Deroose.
The delegation underlined that while the government is ahead on some structural
reforms like pension reforms, which it described as "impressive,"
there are still many more reforms that must be undertaken.
It said
Greece
must
open up the so-called "closed off professions" and to liberalize the
wholesale energy sector to improve economic growth, employment and incomes. "We
discussed various issues for liberalization. There are various options on the
table and the discussions are ongoing," said Thomsen.
Another key issue to address is the country's loss-making railway system which
has a massive EUR10 billion debt and still offers poor services. The delegation
said
Greece
needs
to decide by itself how to proceed with a comprehensive restructuring program.
"The current program and support package reflects the government's
priorities, we are only here on behalf of the international community to
provide technical advice," Thomsen added.
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