The recovery of the Greek economy, which is already under way, depends on seven key factors outlined by the country’s respected Center of Planning and Economic Research (KEPE) in a report released on Wednesday.
These are listed as political stability, a comprehensive development plan with short- and long-term targets, the continuation of the promotion and adoption of the necessary structural reforms, the modernization of public administration and the judicial system, an overhaul of the tax system to fight tax evasion, cuts in red tape and administrative costs, and tackling corruption.
According to the report, the goal of maintaining the stabilization of public finances in 2014 seems attainable but important constraints are posed by political disagreements as regards structural reforms, the results of European stress tests on Greek banks and nonperforming loans.
KEPE’s “fear index” regarding the Greek economy, which stood at 35.26 percent on July 15, was slightly higher than the average for the period since January 1, 2004 (34.5 percent). This is taken to reflect the continued rebound in confidence in the Greek economy and stock market, as well as favorable investor expectations regarding the derivatives market.
Liquidity for enterprises remains an important problem, the report notes. The gradual restoration of normal financing conditions depends largely on the successful restructuring and recapitalization of banks, and dealing with the problem of nonperforming loans, given the high cost of financing.
In a report on the financing of the private sector, the Task Force for Greece made special mention of the founding of an Institution for Growth, while also pointing out that more than 3 billion euros in European Union subsidies is available through programs for bolstering entrepreneurship. However, only 463 million seems to have been disbursed so far.
KEPE also notes considerable delays in the privatizations program, where the revised target of 1.5 billion euros for 2014 (from 2.7 billion) also appears in doubt. It is important that such delays are overcome, as privatizations, beyond the fiscal and financial benefits, will contribute to investment and the inflow of long-term capital.