Greece must carry out urgent structural reforms in all sectors of the economy, focusing in particular on reducing the public debt and sanitizing the ailing social security system by the end of this year, a key European Commission economic report warned yesterday.

The Spring 2002 Economic Forecasts and Policy Guidelines said Greece had accomplished much but still had a lot of work ahead. «Despite the progress that has been achieved, the challenges that the Greek economy continues to face require a further improvement of its functioning,» the report said.

It called for debt reduction, structural reforms in all sectors of the economy, better market functioning and an improved business environment.

Regarding fiscal policy, the Commission noted that the Economy Ministry's current tactic of improving public finances by maintaining a high primary surplus will become less effective over the next two years, as it is exclusively intended to reduce the cost of servicing the public debt.

The report stressed the need for reforms to the social security system by the end of 2002, «in order to avoid very serious fiscal problems» next year, and advised action to encourage older workers not to seek retirement.

And it called on the government to ensure that the 2002 and 2003 budgets, as well as collective work contracts, do not create inflationary pressure.

On the other hand, the report noted that Greece is expected to enjoy the highest rate of growth among the 12 eurozone countries in the course of the next two years.