13.07.2017

Greece step back from austerity, sets to leave EU blacklist

400The EU recommended on Wednesday that three times bailed-out Greece has made enough progress in balancing its budget to be removed from special oversight of government spending.
The move is a further boost for Athens days after it secured a fresh tranche of cash from its latest bailout to meet crucial debt payments and avoid a fresh crisis. 

"This is a very symbolic moment for Greece," said Pierre Moscovici, the EU's top economy official. "It's the end of austerity, and the end of austerity means also we need to move to a strategy that's based on growth, job creation and social fairness."

The decision showed the progress Greece has made, said European Commission vice-president Valdis Dombrovskis, who has special responsibility for the eurozone. "I invite Greece to build on its achievements and continue to strengthen confidence in its economy," Dombrovskis said, adding that it was "important for a return to the markets."

EU rules require member states to run a budget deficit - the shortfall between government revenue and spending - of not more than 3.0 per cent of total annual economic output.
The lifting of the Excessive Deficit Procedure (EDP) for Greece will allow the government greater leeway in managing its finances after years of austerity and spending cuts demanded by Brussels to bring the budget deficit under control.


"This follows the substantial efforts in recent years made by the country to consolidate its public finances coupled with the progress made" in its debt rescue programmes, the European Commission said in a statement.
The Commission noted that if member states approve its recommendation later this year, only three countries will remain under the excessive deficit procedure - France, Spain and Britain. At the height of the financial crisis in 2010, 24 of the 28 member countries were on the EDP blacklist.

Greece has been under the spotlight since 2009 when its debt crisis exploded in the wake of a statistics scandal that showed the public finances were in far worse shape than thought. Greece's budget deficit was suddenly revised upward to double-digit levels and way above an EU limit of 3 percent.

The turnaround in the government budget has been remarkable. In 2016, Greece posted a surplus of 0.7 percent compared with the peak deficit of 15.1 percent in 2009.

Greece is hoping to exit its bailout era next year and is planning to start tapping bond markets, possibly in the next few months. The recent release of 7.7 billion euros of bailout funds means the country has enough money to pay upcoming debts and its budget surpluses will help it build up cash balances to pay them in the future.
Under the terms of its bailout, the country must sustain a primary surplus , which excludes interest payments, of 3.5% of GDP until 2022, and stabilize around 2% in the medium term.


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