Glimmer of hope for Greek recovery

Glimmer of hope for Greek recovery


By Lefteris Yallouros – Athens

Greek Finance Minister Yannis Stournaras met with the troika inspectors in Athens on Tuesday in what was the first of a series of meetings to be held between Greek government officials and the representatives of the European Commission, the European Central Bank and the International Monetary Fund.

At the time of the meeting, the European Commission released updated forecasts for Greece, seeing economic output expand 0.6 percent in 2014 after shrinking 4 percent this year. The country’s public debt ratio will peak at 176 percent of GDP this year, while this year’s budget deficit will be around 4 percent of GDP after one-time factors not included in the troika’s evaluation.

The Commission said Greek unemployment was expected to rise to 27 pct this year (unchanged from May’s forecasts) from 17.7 pct in 2011 and 24.3 pct in 2012, falling to 26 pct in 2014 and to 24 pct in 2015.

The country’s fiscal deficit is projected to rise to 13.5 pct in 2013 (reflecting a bank recapitalization cost) falling to 2.0 pct in 2014 and 1.1 pct in 2015, while the Greek public debt is expected to rise to 176.2 pct of GDP this year, from 156.9 pct in 2012, falling to 175.9 pct in 2014 and 170.9 pct in 2015.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said he’s confident Greece can meet its fiscal targets. “Let the review resume and the Greek authorities now continue and even intensify their work,” Rehn said in Brussels Tuesday. “I’m sure that we will be able to find a satisfactory solution as regards to how to ensure the fiscal gaps will be filled and the fiscal targets will be met.”

The encouraging forecasts by the EU Commission will give the Greek government a boost in negotiations with the troika. Athens hopes it will reach an agreement with the troika over the thorny issue of next year’s fiscal gap in order to have the next tranche of funds released.

While Tuesday’s meetings didn’t go into much detail over progress made by Greece in the implementation of its adjustment program, the troika is reported to be unhappy at the slow government progress over the privatization of public assets and implementation of reforms.

Differences over how to plug the funding gap will have to be bridged without imposing more austerity; this is made clear by Greek officials in every way possible.