From Pay Rises to New Banks, Here's Greece's Post-Bailout Plan
(Bloomberg) -- Ever wondered what Greece plans to do with its economic freedom once it escapes the shackles of its bailout in August?
Euro-area finance ministers got a sneak peek of the government’s plans at their meeting in Bulgaria’s capital Sofia on Friday, as Greece’s Euclid Tsakalotos presented a draft of its “holistic growth” strategy for the future. This includes restoring “collective bargaining” in the labor market, a “gradual increase in the minimum wage” and the creation of a “Hellenic Development Bank,” according to a copy of the presentation obtained by Bloomberg.
Coming up with a growth strategy is among the conditions attached to the final review of the country’s lifeline, as creditors expect Europe’s most indebted state will grow out of its woes, limiting the need for additional concessions on the repayment terms of bailout loans. With the unemployment rate still over 20 percent, the proposed tightening of labor-market rules and wage increases may go against established economic wisdom, while creditors have opposed the creation of a state-owned development bank out of cronyism fears.
Greece’s economic rebound has so far been weaker than expected, as gross domestic product expanded by 1.4 percent last year versus an initial forecast by the European Commission for a 2.7 percent expansion. The country has also slipped lower in global competitiveness rankings, while its population is aging and shrinking according to the country’s statistical authority, and its banks are grappling with the highest ratio of soured loans in Europe.
In its growth plan, the government of Alexis Tsipras promises to implement key structural overhauls that have been dragging on for years, including the creation of a land registry, and the acceleration of judicial procedures. The remaining points of the presentation are references and commitments, including to “further reducing the administrative burden,” and “encourage private sector investment in R&D.”
Greece’s previous brief spell of economic growth in 2014 was abruptly interrupted after Tsipras was elected and his clash with creditors brought the country’s banks to the brink of collapse. Transactions are still subject to capital controls and GDP is lower than before his election.
European nations plan to keep Greece on a tight leash after its bailout expires, including by conditioning any additional debt relief measures to not rolling back previous economic reforms. European Central Bank executive board member Benoit Coeure cautioned on Friday that “the stronger” Greece’s post-program surveillance is, “the better” it will be, as any slippage would undermine the confidence of bond markets.
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