ECONOMY

Progress noted but risks remain

Greece has made a strong start in implementing an austerity program to tackle its debt crisis but risks remain, according to the external agencies monitoring the program, who urged reforms in energy, banking and the public sector. «Our overall assessment is that the program has made a strong start,» the European Commission, European Central Bank and International Monetary Fund said in a joint statement yesterday. «The end-June quantitative performance criteria have all been met, led by a vigorous implementation of the fiscal program, and important reforms are ahead of schedule,» it added. The second installment – to the tune of 9 billion euros – of Greece’s 110-billion-euro EU-IMF loan is expected to be granted to Athens by September 13 after the first 20-billion-euro installment was paid in May. «The program is indeed off to a very strong start but, as expected, there are pressure points,» said IMF official Poul Thomsen, adding that there was clearly a need to control extra budgetary expenses including at state hospitals and on the municipal level. Greece has pledged to reduce its deficit from 13.6 percent of gross domestic product last year to 8.1 percent at the end of 2010 and to under 3 percent – the EU’s limit – in 2014. «Despite considerable progress in a vast array of areas, key challenges and risks remain,» said Servaas Deroose, deputy director general for economic and financial affairs at the European Commission. Athens must come up with a plan to free up the energy and banking markets by the end of the year, he said, adding that the government was preparing a strategic review of lenders in September. Finance Minister Giorgos Papaconstantinou welcomed the positive marks from the country’s international lenders, adding that he hopes to beat a target to slash the budget deficit to 8.1 percent of gross domestic product this year despite lower-than-expected revenues in the first half. «On the basis of GDP development and higher-than-expected inflation… we will have a deficit of below 8.1 percent by the end of the year,» according to the minister. Papaconstantinou said budget revenues would get a 2-billion-euro boost in the second half of the year thanks to a value-added tax hike. »Six months have passed and we have proved all the Cassandras wrong, we will get the third and all remaining installments [of the EU/IMF loans] because the government is determined,» he said. The minister said the government would extend a 28-billion-euro bank support scheme already in place, providing another 25 billion euros in state guarantees to lenders issuing bonds to ensure the real economy is adequately funded.