Statement by the EC, ECB, and IMF on their second review mission to Greece

Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Athens during November 14-23 for the second review of the government’s economic program, which is being supported by a EUR 80 billion loan from Euro area countries and a EUR 30 billion Stand-By Arrangement with the Fund.

The mission's overall assessment is that the program remains broadly on track. The end-September quantitative criteria have all been met. While challenges remain, significant progress has been made, particularly in reducing the fiscal deficit.

>> Full statement by the EC, ECB, and IMF on second reveiw mission to Greece(27 kB)  

2011 Outook on Greek economy

Greece's economy is expected to begin turning around in 2011. Wage and price inflation is beginning to moderate, setting the stage for improvements in competitiveness.

Further fiscal efforts needed

Deficit reduction by 6% of GDP in 2010 is larger than the initially targeted change. At the same time, weaker-than-projected revenue collection and data revisions for 2009 mean that an extra effort will be needed to meet the deficit target of 7.5 % of GDP in 2011, which the government has reaffirmed. New measures have been agreed to broaden tax bases and eliminate wasteful spending.

The government’s fiscal policy remains to reduce the deficit to below 3 % of GDP by 2014. The government’s medium-term budget strategy paper, to be discussed in the next review, will specify time-bound action plans for crucial structural reforms needed to achieve the remaining fiscal adjustment, and to do so in a socially balanced way.

Programme proves effective for financial sector stability

In the financial sector, the program has been effective in supporting stability. The activation of the EUR 25 billion expansion of the government program to guarantee bank bonds, adopted in August, will contribute to support the liquidity position of Greek banks.

Further need for structural reforms

Structural reforms are needed to secure Greece’s competitiveness, reinvigorate output, and increase employment. While significant progress has been made, many of the reforms that are necessary to transform Greece into a dynamic and export-driven economy require skillful design and political resolve to overcome entrenched interests. The challenge now is to implement an ambitious schedule for these next-stage reforms.

Next steps

Approval by the Eurogroup of the conclusion of the second review will allow the disbursement of EUR 9 billion through mid-January 2011 (EUR 6.5 billion by the euro area Member States and EUR 2.5 billion by the IMF).

The mission for the next program review is scheduled for February, 2011.