The European Commission is to end its enhanced scrutiny of the Greek economy, marking an end to a debt crisis triggered by the 2008 global financial tumult that almost pushed the country out of the eurozone.
In a letter to Greek finance minister Christos Staikouras on Wednesday, EU economy commissioner Paolo Gentiloni said Greece had “delivered on the bulk of the policy commitments” made to the eurogroup of 19 eurozone member states and “achieved effective reform implementation” despite the impact of Covid-19 and the war in Ukraine.
Staikouras said on Twitter that the announcement “marks the achievement of a major national goal for Greece”.
Following the 2008 financial crash, Greece was plunged into a debt crisis that led to bailouts by the EU and IMF beginning in 2010. Over the decade that followed, the country’s economy shrank by a quarter and the disposable incomes of Greek citizens fell by a third on the back of austerity policies imposed by the so-called “Troika” of institutions that included the commission, the IMF and the European Central Bank.
Thousands of young Greeks left the country in search of work as unemployment in the country peaked at 27.8 per cent in 2013 while the government was forced to make drastic cuts to its pensions system and civil service in return for financial aid.
The commission, which monitors the budgets of all 27 member states, has been supervising reforms to the Greek economy since the bailout programme was initiated.
The stringent terms of the bailout, largely dictated by Germany, almost pushed Greece out of the eurozone in 2015 when the then-prime minister Alexis Tsipras put the conditions to the Greek population in a referendum. Voters rejected the terms of the aid package but Tsipras implemented the reforms regardless.
The announcement of the end of the strict monitoring programme comes as the ECB puts in place mechanisms to prevent a second meltdown of the eurozone economy.
Last month the ECB raised interest rates for the first time since 2011 and has focused reinvestment of maturing bonds on southern EU countries, including Greece.
Following the most recent trip of EU officials to Athens in April, the commission noted that economic growth was forecast to reach 3.5 per cent in 2022 and 3.1 per cent in 2023 despite lingering uncertainty from the pandemic and rising energy costs.
It also said there was a “positive surprise” in the government’s primary deficit — the difference between government revenues and spending excluding interest payments — which was 5.5 per cent of gross domestic product in 2021, 2.1 percentage points less than had been expected.
The so-called “economic adjustment programme” ended in June 2018 but Brussels has kept Greece’s finances under surveillance since then.
The commission said in a statement that the risk of “spillover effects on the Euro area economy have diminished significantly” and that more detailed monitoring was “no longer justified”.
A final tranche of debt relief is due to be paid in November should Greece meet the conditions of a “post-programme surveillance” report.
In a letter responding to Gentiloni, Staikouras said Greece had implemented reforms in six key areas — fiscal policies, social welfare, financial stability, labour markets, privatisation and public administration — which had “put in place a solid platform for Greece to achieve sustainable and inclusive long term growth”.
Source: Economy - ft.com
