In its Winter 2016 Economic Forecast released on Thursday, the European Commission stresses the need for additional measures in Greece this year and next for Athens to meet its fiscal targets, although it has moderated its recession forecast for 2016.
Brussels’s demand for more measures highlights the level of pressure that Greece’s creditors are exerting on Athens, as such statements while negotiations are ongoing are quite unusual for the creditors.
Asked to comment on the Commission’s demand, which mirrors that of the International Monetary Fund, Finance Minister Euclid Tsakalotos said that no one had asked him for any new measures, referring to meetings he had held with the creditors’ senior representatives in Athens this week. The Finance Ministry argues that 2015 closed with a primary surplus that may exceed 0.4 percent of gross domestic product, against a target for a primary deficit of 0.25 percent of GDP. It adds that no new measures are required for the 2016 fiscal target to be met.
In its updated forecasts the Commission expects Greece’s 2015 primary deficit to come close to the target, at 0.22 percent of GDP. It also refers to measures worth some 2 billion euros in the 2016 budget (concerning the social security and tax systems and reducing expenditure) that have neither been determined nor implemented.
Presenting the report, European Commissioner for Economic and Financial Affairs Pierre Moscovici expressed confidence that the Greek economy has the potential to grow provided there is stability and reforms are implemented. He added that the “new government” is stronger and has already made some “brave” but “necessary” reforms.
Brussels also discerns an improvement in Greek economic conditions. After a year with zero recession, as it calculates, this year Greece’s GDP will contract 0.7 percent (from a previous forecast for 1.3 percent) and recover 2.7 percent in 2017. Unemployment will ease to 24 percent in 2016 and 22.8 percent in 2017, from 25.1 percent in 2015.