ATHENS: Greece should implement the reforms called for by its bailout programme not because it's required to, but because it recognises that they will help it emerge from the crisis, the head of the euro zone's bailout fund said on Wednesday.
Such recognition would help it implement the reforms successfully, which in turn would help it regain market access and qualify for further debt relief, Klaus Regling, managing director of the European Stability Mechanism, said in a speech at an Economist conference in Athens. "Let me repeat that what is needed in Greece is a strong, a stronger ownership of the adjustment programme," Regling said, noting that it was not possible to foresee now how the economy would fare in 10 or 20 years.
"A successful implementation of this programme is the only way for Greece to regain market access and for any debt relief measures to have a real effect," he said. Regling also defended the euro zone's step-by-step approach on debt relief for the crisis-hit country.
That approach gave Athens the right incentives to comply with the terms of its ESM bailout, he said, and allowed the euro zone to gauge how much relief was really needed over the years. He hailed Greece's privatisation drive but added that "much work remains to be done in the next two years".
A second review, which includes labour reforms and creating a more investor-friendly environment, needs to be wrapped up swiftly, he said.
The first review dragged on for six months before it was concluded last week.
That allowed the ESM to give 7.5 billion euros ($8.47 billion) of bailout aid on Tuesday. Another 2.8 billion will be available when Greece reaches further milestones, Regling said.
Athens needs the funds to pay European Central Bank bonds and International Monetary Fund loans in June and July to and pay down growing state arrears.
"It is good to be reminded that such talks should not take too long," Regling said. The first review was delayed mainly by a rift between the European Union and the IMF over Greece's fiscal progress.
Athens has agreed to achieve a primary budget surplus of 3.5 percent of GDP by 2018 and maintain it for the medium run.
The IMF argued the target was not realistic. During the conference on Wednesday, Deputy Finance Minister George Chouliarakis said Greece would honour its bailout commitments but the target beyond 2018, when Greece's adjustment programme ends, should be lowered to 1.5 to 2 percent of GDP. "A commitment is a commitment and we have to honour this commitment if we want to restore and enhance credibility," he said. "But we need to reconsider the level of primary surplus targets beyond the lifetime of the programme, after 2018."
The IMF mission chief for Greece, Delia Velculescu, said such targets were still "ambitious" and added that Greece needs "very deep" debt relief, which should be delivered by 2018. Her EU counterpart, Declan Costello, said implementation has been the Achilles heel of Greece's previous bailout programmes.
"(There was) a huge reform effort back in 2010 and then it stopped. A huge reform effort back in 2012-13 and then the foot was taken off the accelerator," he said.
"The key choice facing Greece now is whether to slacken off the pace of reform or whether to stick with it and pursue the implementation."
Comments
Comments are closed.