Greece’s creditors on Tuesday sent multiple messages to the government, on issues including the need to cover the country’s investment gap and strengthen growth through healthy forces – not zombie companies – as well as the fact that the country must return to fiscal discipline at some point.
The conference organized in Athens by The Economist focused particularly on the future of the Greek economy, with the representatives of the country’s European creditors expressing concern over Greece’s capacity to efficiently absorb the resources from the Next Generation EU fund. The government response at the conference was to acknowledge this is a Herculean task.
European Stability Mechanism chief Klaus Regling told the conference that Greece needs investments to cover the gap from the years of the crisis, noting that so far the pace of investments lags the EU average rate. Consequently, he added, reforms have to focus on growth-friendly initiatives. In this context, Regling noted, the proposals by the Pissarides Committee are most welcome.
The European Commission’s deputy director-general for financial affairs, Declan Costello, revealed talks have started with Athens on the plan to get the Next Generation EU funding, and what is encouraging, he said, is that the Commission is in agreement with the Pissarides report regarding the need to change the production model and reduce tax rates. He therefore forecast there will soon be an agreement on priorities, although the main issue relates to the implementation of the plans.
Eurogroup Working Group President Tuomas Saarenheimo said deficits will inevitable grow now and there is nothing that can be done about that, but some streamlining needs to follow in the next few years. He added that there is no point in creating zombie companies, but only sustainable ones in an environment where they can prosper.
Government officials responded on the same wavelength: Finance Minister Christos Staikouras said, “We need to continue with out fiscal streamlining after 2021,” adding that “we need to strike a balance between sustainable recovery and correct fiscal policy.”