Greece completes negotiations with lenders

Greece will complete negotiations with its lenders on a review of the Greek economic programme “unless sudden political surprises occurred”, the Parliament’s State Budget Office said in its quarterly

report on the Greek economy, released on Tuesday.

The report, although it expressed reservations over the final “policy mixture” of the first review, underlined that completion of negotiations would be positive for the Greek economy for several reasons. Among others, it will contribute to stabilise and improve the political and economic climate in the country, supporting banks and smoothening funding conditions of the economy from the banking system. At the same time, completion of a review will lead to the inclusion of Greece in European Central Bank’s bond-buying programme.

The report noted, however, that a package of measures on the pension and tax systems were expected to negatively affect the economy, but stressed that the final result would be positive. “With an agreement…conditions would be created to avert a prolonging of a condition characterised by increasing burdens on the private sector, reducing incomes in the public sector, limiting capital movement, an exit of enterprises to neighbouring countries…”, the report said, adding that the economy was not expected to recovery automatically soon after completion of the first programme review, unless uncertainty over future policy was eradicated, governance rules changed and the necessary reforms were made. “Greece has no other option but to implement a third memorandum (with the necessary improvements where possible,” the report said.

The Parliament’s State Budget Office noted that a prolonging of negotiations - expected to be completed in October/November 2015 according to initial plans - had a significant cost, such as a recession in 2016, extending an economic contraction for the ninth successive year with an accumulated GDP loss of around 28 per cent and an unemployment rate of above 24 per cent. The report criticised lack of government policy on growth and said that a spending cut policy was focusing on the wrong points such as freezing payments to suppliers and tax returns, undermining the real economy.

Source: ANA-MPA

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