Press Release No.11/212
June 3, 2011
Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) have concluded a mission to Greece to discuss recent economic developments and policies needed to keep the country’s economic program on track. The mission has reached staff-level agreement with the authorities on a set of economic and financial policies needed to meet program objectives. Strict implementation of these will help to restore fiscal sustainability, safeguard financial sector stability, and boost competitiveness to create the conditions for sustained growth and employment.
Overall, significant progress, in particular in the area of fiscal consolidation, has been achieved during the first year of the adjustment program. However, reinvigoration of fiscal and broader structural reforms is necessary to further reduce the deficit and achieve the critical mass of reforms needed to improve the business climate and pave the way for sustainable economic recovery.
Regarding the outlook, the recession in 2010 was slightly more pronounced than what was anticipated. But there have been encouraging signs recently, in particular a notable pick-up in exports. Unit labour costs are set to decline further, supporting the strong export dynamics, and inflation is on a declining trend. We expect the economy to stabilize at the turn of the year.
In the fiscal area, further sustained deficit reduction will require comprehensive fiscal structural reforms. The government has committed to an ambitious medium-term fiscal strategy that will enable it to maintain its 2011 and medium-term fiscal targets. This strategy includes a significant downsizing of public sector employment, restructuring or closure of public entities, and rationalization in entitlements, while protecting vulnerable groups. On the revenue side, the government will reduce tax exemptions, raise property taxation, and step up efforts to fight tax evasion.
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