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03 June 2011

Statement by European Commission, ECB and IMF on the fourth review mission to Greece


Significant progress has been made, in particular in the area of fiscal consolidation. However, reinvigoration of fiscal and broader structural reforms is necessary to reduce the deficit further and achieve the critical mass of reforms needed to pave the way for sustainable economic recovery.

Regarding the outlook, the recession in 2010 was slightly more pronounced than 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 stabilise 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 rationalisation 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.

The government is committed to accelerating its privatisation programme significantly. To this effect it will create a professionally and independently managed privatisation agency, and has drawn up a comprehensive list of assets for privatisation with the aim of realising revenues of €50 billion by the end of 2015. The government will assess progress against intermediate quarterly and annual targets.

In the financial sector, liquidity remains tight, but policies are in place to ensure adequate liquidity provision for the banking system. The banking sector remains fundamentally sound and the authorities are increasing capital requirements to strengthen capital buffers further, giving priority to private market-based solutions. However, the Financial Stability Fund is available as a backstop for viable banks that cannot raise capital in the private market.

Further progress has been made with structural reforms. Legislation to modernise public administration, reform healthcare, improve the functioning of the labour market, remove barriers to setting up and operating a business and liberalise transportation and energy has already been passed or is underway. The government will continue to push ahead in these areas, with a particular emphasis in coming months on growth-drivers, such as reviving the tourist industry and removing administrative barriers to exports. To make sure that the reform frameworks are effective as soon as possible, the authorities will strengthen the process of implementation, including through technical assistance from the IMF, EU Member States, and the European Commission, and put monitoring mechanisms in place.

Press release


© ECB - European Central Bank


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