Brussels notes Greek progress

The fiscal reforms implemented in Greece have been remarkable but many challenges remain in various sectors and the country needs to develop a very strong background in structural reform application, concludes the European Commission report on Greece published on Monday in Brussels.

The report notes that the economic contraction in Greece was significantly contained in 2013, dropping to 3.9 percent of gross domestic product from 7 percent in 2012. According to the spring 2014 forecasts, the country’s GDP is set to expand 0.6 percent this year and to swell by 2.9 percent next year.

The Commission also discerns a decline in unemployment: From a peak of 27.3 percent last year it expects the jobless rate to amount to 26 percent this year.

The prices of consumers goods fell in 2013 and are expected to drop further within 2014 as a result of the reduction of labor costs and changes in the market. As the economy improves, a small increase in consumer prices should be seen next year.

Notably, the Commission’s report says that any possible negative developments in Ukraine and Turkey will likely lead to a resulting slowdown in structural reforms in Greece.

Brussels acknowledges that while delayed, Greece’s progress in terms of its second adjustment program eventually proved substantial. The fiscal state of the country has improved, while the banking sector has been stabilized and consolidated. The package of structural changes voted through after the fourth assessment in April will strengthen Greece’s chances of sustainable growth and creating employment, the report estimates.

Special reference is also made to the 2013 primary budget surplus (0.8 percent of GDP), which “exceeded the targets,” and to the country’s return to the international bond markets after a four-year absence with the issue of a five-year bond.

In the credit sector the Commission describes private funds’ entry to banks as a positive sign, illustrating the market’s confidence in the industry, and stresses that combating youth unemployment should be a priority.