Tuesday

22nd Oct 2019

Troika concludes Greek mission, warning more austerity needed in 2013

Inspectors from the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund have finally completed their mission to Athens, broadly giving Greece a passing grade that will likely allow eurozone ministers and the IMF to release €8 billion in bail-out cash to the embattled republic.

The government has achieved “a major reduction in the deficit since the start of the [bail-out] programme despite a deep recession,” the troika mission on Tuesday afternoon said in a statement, but added that the targets imposed by the international lenders will not be reached this year.

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  • The mission statement acknowledged that the recession in Greece will be deeper than expected (Photo: John D. Carnessiotis, Athens, Greece)

The mission said that the failure to meet these goals was a result of a drop in GDP but also “because of slippages in the implementation of some of the agreed measures” by the government.

The troika gave its blessing to recently announced austerity and adjustment measures, saying that they should be sufficient to bring the country’s deficit targets back on track “in combination with a determined implementation” of mid-term fiscal consolidation plans.

However, the inspectors said “additional measures are likely to be needed” from 2013-14, and that such measures should be adopted by the middle of next year.

They said that they have now reached a “staff-level” agreement with the Greek authorities on what future policies need to be implemented. The accord must still however be approved by eurozone ministers and the IMF.

The mission statement acknowledged that the recession in the country will be “deeper than was anticipated in June and a recovery is now expected only from 2013 onwards.”

There remains no evidence of an increase in investment by enterprise in the country, a state of affairs that the troika blame on the government’s tardiness in implementing EU-IMF imposed austerity and structural adjustment.

“The reform momentum has not gained the critical mass necessary to begin transforming the investment climate," it said.

The mission appeared to have rejected the analysis of some economists that pin the blame for the investment strike on the lack of opportunities to make a profit in a contracting economy made worse by EU-IMF-imposed austerity.

In a swipe at the competence of the government, the statement said that progress in preparation of the privatisation of vast swathes of the public-sector have now been achieved but only after the creation of “a professionally managed privatisation fund”.

The team admitted however that revenues from privatisation are likely to be “significantly lower than expected,” and warned that the process must remain “independent from political pressures”.

The troika mission did find one bright spot: a rebound in exports “albeit from a low base” as a result of declining wages.

They also welcomed a restructuring of the transport sector, licensing procedures and deregulation of a number of professions.

The latter has produced substantial anger amongst lorry and drivers, who had to take out loans in the tens of thousands. New drivers now pay massively reduced licence fees while the older ones still must pay off their sizeable debts.

Still, the troika worries that even here, “overall progress has been uneven” and a “reinvigoration” of such deregulation is necessary. The troika believes it “essential” that the authorities put “more emphasis” on restructuring of the economy.

On the streets of the country however, civil unrest remains the government’s main barrier to such moves.

On Tuesday, public transport was paralysed once again in the capital while civil servant blockaded the interior ministry and the general accounting office.

Separately, oil refinery workers announced they will continue their industrial action as long as necessary in protest against the government’s intentions to cut spending in the sector. Petrol stations have supplies for another three to four days, according to local reports, while cars have begun queueing outside forecourts.

Prime Minister George Papandreou is scheduled to meet EU Council President Herman van Rompuy on Thursday for talks.

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Inspectors from the so-called troika of the EU, European Central Bank and the International Monetary Fund returned to Athens on Thursday to review the Greek government’s austerity work, only to find staff from seven key ministries blockading their way.

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If the subtle change in emphasis in the EU’s discourse on austerity is to be believed, some in the bloc are beginning to be much more open to policy options beyond public-sector cutbacks.

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