EU Paves the Way for $912 Million in Greek Debt Relief Measures

People swim and paddle in the sea at Kavouri beach, south of Athens, Greece. (Photographer: Yorgos Karahalis/Bloomberg)

EU Paves the Way for $912 Million in Greek Debt Relief Measures

The European Commission paved the way for Greece to benefit from further debt relief measures worth 748 million euros ($912 million), saying the country has met all the required conditions.

“Greece has taken the necessary actions to achieve its due specific commitments, despite the challenging circumstances caused by the pandemic,” the Commission said Wednesday in its 10th report for Greece under the enhanced surveillance framework.

European authorities also requested that Greece keep up the momentum and redouble its efforts to address delays in implementation partly caused by the pandemic, mainly in financial sector reforms.

EU Paves the Way for $912 Million in Greek Debt Relief Measures

Greece is fighting to overcome a nearly 25% drop in output during its decade-long debt crisis, compounded by an additional 8.2% decline last year due to the pandemic.

The government of Kyriakos Mitsotakis is banking on European Union funds due to flow in over the next six years. Greece is set to get as much as 32 billion euros through the EU’s Recovery and Resilience Facility.

Greece’s “implementation of the reforms and investments presented in the Recovery and Resilience Plan is set to provide an additional growth impulse and momentum to efforts to modernize the economy,” the Commission said.

Main Points of the Report:

  • The pace of recovery in the short term is likely to be somewhat slower than previously forecast, due to prolonged containment measures. But the launch of the implementation of the Recovery and Resilience Plan is set to boost growth going forward.
  • Despite progress with the vaccination campaign, the evolution of the pandemic at both domestic and international level remains a cause of uncertainty, with repercussions for tourism and tourism-related sectors.
  • There’s also uncertainty on the speed of recovery in the corporate and the banking sectors after the phasing out of support measures, which could create pressure on firms’ liquidity and possibly solvency.
  • On the upside, savings accumulated during the pandemic could boost spending.
  • Fiscal policy will remain accommodative in 2021 and most of the fiscal measures adopted to mitigate the social and economic costs of the crisis are expected to be phased out in 2022.
  • Debt sustainability analysis shows that in a baseline scenario, debt-to-GDP ratio remains on a downward path from 2021 onward. Debt is projected to reach 169% by the end of the decade, and to decline below 100% of GDP by 2047 in the baseline scenario.
  • Greek debt is sustainable in the medium term, the International Monetary Fund said in its report Wednesday. The fund also called on the Greek government to find a solution along with European authorities for the weak quality of banks’ capital.

©2021 Bloomberg L.P.

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