Budget surveillance better, says Reichenbach [update]

Greece has greatly improved how it monitors its budget and has tested the limits of its citizens with its spending cuts, the head of the European Commission’s special task force said.

“For months the specter of bankruptcy hovered. No one knew if the private investor debt write-down would work. People were skeptical about whether the government would make savings. All this is over. The foundations for progress are in place,» Horst Reichenbach told Germany’s Handelsblatt newspaper in an interview published on Monday.

Asked about the further spending cuts that Greece must deliver Reichenbach said: «Greece has made a unique achievement. It has tested the limits of what people can bear and this will be kept in mind.”

Reichenbach, who heads the special task force to help rebuild the Greek economy said budget visibility had improved hugely and for the first time it was possible to have an overview of spending at national, regional and local level.

He noted, however, that Greek exports had faltered at the end of last year and would not have the same momentum this year as last. Better financing for exporters and cutting red tape could improve the situation he said.

The debt-choked country averted an uncontrolled default earlier this month when it struck a debt exchange deal with private creditors that paved the way for the EU and IMF to approve a 130-billion euro bailout.

Completion of the second EU/IMF aid package will mean the end of the coalition government under technocrat Prime Minister Lucas Papademos, which was formed in November with a mandate to conclude the bailout and then hold elections.

Reichenbach said he saw a strong possibility that the parties backing the current coalition government, PASOK and New Democracy would continue in a leading position. [Reuters]

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