Athens EU Finance Commissioner Paolo Gentiloni speaks of “an important step for Greece”, Athens Finance Minister Christos Staikouras even sees a “historic day”. former crisis state. Ministers followed the recommendation of the European Commission.
Athens can now leave the so-called “enhanced surveillance” on August 21. Greece “is no longer the black sheep of Europe” commented Prime Minister Kyriakos Mitsotakis. Now the “painful cycle that began twelve years ago” is coming to an end.
During Tuesday’s visit to Athens, Federal Finance Minister Christian Lindner praised the “strong budget figures” and the successes of Greek government reforms. But he has to continue his efforts, Lindner warned.
In its latest “Enhanced Surveillance Report”, the fourteenth such audit report since 2018, the European Commission also confirms that the country has made good progress, but at the same time sees a need for further action.
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In 2021 and the first quarter of 2022, Greece’s economic growth was well above the euro area average. This year, the Commission expects an increase of 3.5 percent. in Greece, compared to 2.4%. in the euro area.
The recovery is primarily driven by rising investment, exports and a return to tourism. The budget deficit was lower than expected last year.
The five weaknesses of the Greek economy
The auditors also praise reforms in financial management, healthcare, public procurement, the judiciary and labor law. But the Commission also identifies five weaknesses in the Greek economy:
- At 193 percent of gross domestic product (GDP), public debt is still by far the highest of any EU country.
- While Greek banks are making good progress in mitigating credit risk, the NPL ratio is 12.8%, the highest in the EU and the institution’s capital base is weak.
- The balance of payments deficit is growing despite the tourism boom.
- Greece has been successful in reducing unemployment, but the 12.2% unemployment rate is the second highest in the EU after Spain.
- A shrinking population slows down medium-term growth prospects and places an increasing burden on social systems.
The end of enhanced surveillance is an important step for the country. From spring 2010 to mid-2018, Greece received € 288.7 billion in international financial assistance. The monitoring mechanism was agreed at the end of the third and final bailout in summer 2018.
Greece remains under surveillance
The process included quarterly review missions on the country’s economic, fiscal and financial situation and reform agreements. Monitoring should help identify and correct possible risks and undesirable changes at an early stage.
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With the end of the intensified supervision, Greece now also expects a debt relief payment of EUR 748 million. These are the price gains that the European Central Bank (ECB) and national central banks have made with the support of purchases of Greek government bonds.
Another installment of these central bank profits, also of € 748m, is expected to be approved in late October. To do so, however, the government in Athens has yet to implement a series of unresolved reform measures. These include activities in the pension administration, expansion of the cadastral system and further privatizations.
However, the withdrawal of “Extended Surveillance” does not mean the end of the examinations. Like the other program countries Ireland, Spain, Cyprus and Portugal, Greece is under surveillance.
However, inspections now only take place every six months, not quarterly, and usually no longer take place on the spot. This supervision will continue until the countries repay 75% of the debt. aid loans granted. In the case of Greece, according to current plans, this will not happen until 2059.
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