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EU Clears the Way for Further Greek Debt Relief Measures

EU Clears the Way for Further Greek Debt-Relief Measures

Greece’s post-bailout program is on track following the latest review, the European Commission said Wednesday, clearing the way for the disbursement of further debt relief measures worth 767 million euros ($860 million). 

“The 12th enhanced surveillance report for Greece finds that the country has further progressed towards achieving the agreed commitments,” despite delays in some areas partly linked to the pandemic and to catastrophic wildfires in August 2021, the Commission said in a report.

“The report could serve as a basis for the Eurogroup to decide on the release of the next set of policy-contingent debt measures,” the Commission said. 

European authorities predict the Greek economy will grow 7.1% this year and 5.2% in 2022, a more optimistic outlook than the government’s own estimates. 

They also said that Greece has delivered on commitments in the energy sector and public financial management, while taking significant steps toward completion of most of its specific commitments by April 2022. 

At the same time, the Commission encouraged the Greek authorities to keep up the momentum and remedy delays on financial sector reforms, arrears clearance, health care and justice. Greece must also preserve prudent fiscal policy in order to ensure sustainable public finances in the medium term, the Commission said. 

The report also said:

  • The ratio of deferred tax credits in banking capital remains high. “Successful capital enhancing actions have taken place over the summer and further are planned in the coming months,” the report reads, while the risk of a cliff effect following the expiration of the moratoria hasn’t materialized so far but downside risks remain.
  • Cash reserves for the general government stood close to 40 billion euros at the beginning of October 2021, the highest level since late 2019.
  • Short-term risks to debt sustainability remain contained, but risks are more significant over the longer run in the “low growth” and “higher risk premium scenarios.” In the baseline scenario, debt decreases from 203% of GDP in 2021 to around 54% in 2060, while gross financing needs remain below 15% of GDP in the long run.

©2021 Bloomberg L.P.