By Richard Johnstone | 9 July 2013
Greece has been awarded its latest tranche of €6.8bn worth of bailout funds after a review by the European Commission, European Central Bank and International Monetary Fund.
Staff from the three agencies have examined the progress of the country’s economic and financial policies in line with the bailout deal, agreed in April 2010 after the cost of government borrowing rose to unsustainable levels.
Analysing the implementation of policies, which included economic reforms and significant cuts in government spending, the troika said the programme remained ‘on track’ overall.
However, it warned that some planned public spending cuts were falling behind.
Overspending was continuing in health, and the government had committed to take ‘corrective actions’ to ensure it achieved a primary fiscal surplus in the current financial year. Ministers had also promised to ensure that targets for mandatory public sector staff redundancies were met.
Other actions being taken included tax reforms to both remove loopholes from tax codes, and to make tax collection more efficient.
Overall, these actions would ensure that reforms are on track, the troika added in its report published yesterday.
It also called for further action to be taken to tackle unemployment, currently 23.8% in Greece, with the help of targeted employment and training programmes supported by the European Union. Additional funding was earmarked for such schemes in the EU’s seven-year budget to 2020, which was agreed last week.
The report also stated that Greece’s economy was likely to contract in 2013, before a ‘gradual return’ to growth in 2014. The nation’s output has already shrunk by more than a fifth since the start of the financial crisis in 2008.
The IMF has also concluded its annual examination of the eurozone itself. The international body said the area had taken action to tackle the ‘immediate threat’ to the currency that existed this time last year, with progress made in Greece highlighted as ‘instrumental’.
Other national governments had also made progress in restoring the health of public finances and implementing structural reforms. Together, these actions had tackled the ‘dangerous’ risks to monetary union, the IMF said.
However, there are ‘serious’ restrictions on growth, and cutting unemployment was ‘imperative’, the IMF said. There was a need for ‘actions on multiple fronts’ to do so, including labour market reforms.
A recent agreement to give countries including France, Spain and Italy more time to meet deficit reduction targets would ‘moderate’ the impact of spending cuts, but further flexibility might be needed, the report said. Even revised spending plans could prove ambitious if growth was disappointing, the IMF concluded, but there also remained a need for ‘a credible medium-term fiscal framework’ to get public sector debt down.
