The heads of the European Central Bank, the European Commission, the European Stability Mechanism and the International Monetary Fund addressed the ongoing Greek bailout program at the 17th Annual Capital Link Forum “Invest in Greece Forum” in the Metropolitan Club.
Declan Costello, the commission’s Mission Chief in Greece, expressed his positive surprise in the lower than expected shrinking of the Greek economy in 2015 and the potential for growth in the second or third quarter of 2016.
The Greek parliament is set to vote on Tuesday on the final set of bailout prior actions that would prompt the release of one billion euros of bailout funds to Greece. The anticipated disbursement would signify the end of the first 26 billion euro sub-tranche of the three-year 86 billion euro bailout package the country agreed to in August.
Costello noted the first review of the program should begin around mid-January and that its successful conclusion would be a major step forward for instilling stability in Greece. The review completion will also mark the commencement of a new set of reforms Greece will have to adopt, including the controversial social security system reforms and increased taxation on farmers, to secure more money from creditors.
“This is progress but it’s certainly not good enough,” he said on the strides Greece has made. “In the sense that the key challenges going forward for Greece to restore competitiveness, to regain market share to redevelop the export trade part of the economy.”
IMF Mission Chief to Greece, Delia Velculescu identified three major aspects that need to be identified. Namely, the country’s weak public finances as Greece still has work to do to achieve its macroeconomic targets. A second major issue is the high volume of non-performing loans. The debt-ridden country must also increase business competitiveness, Velculescu added.
Despite Velculescu’s presence during the ongoing negotiations, the IMF will decide on formal participation in the bailout program following the completion of the first review.
In response to a question regarding Greek Prime Minister Alexis Tsipras’s recent comments that the IMF is not playing a constructive role in the negotiations, Velculescu noted that the fund has been actively supporting the program during the negotiation and reiterated its commitment to helping Greece. However, further reforms must be undertaken by Greece while, debt relief must be provided by European creditors.
Costello noted that given the political commitment for debt relief made during the August agreement, the question is not whether it will happen but rather how. The Commission’s representative expects debt relief discussions to begin in February, after the review.
Ramus Ruffer, the ECB’s Mission Chief to Greece, pointed out that debt relief is something that each of the union’s member states will have to discuss.
Greece’s economic prosperity is tied to political stability. Tsipras’s three-month coalition government is already under pressure having seen its 155 majority seat reduced to 153 seats, just two above the required minimum. The losses have triggered discussions over a new round of elections.
Nicola Giammarioli, ESM mission chief to Greece, noted that Tsipras’s reelection in September following the agreement of the bailout shows that people of Greece have given him the mandate to implement the program.
In a prerecorded video message that was shown following the panel discussion, Tsipras echoed this assertion of the political support to apply the bailout.
“We ended up with a compromising agreement that contains, for the first time, lower fiscal targets, more European investment funds and the clear commitment for the debt relief,” he said on the bailout he agreed to in August. “Those three aspects combined are a crucial stepping stone to restart our economy and tackle the huge unemployment that threatens our social cohesion.”
Tsipras’ message sought to inform investors about the government efforts to reform the economy as well as about the country’s investment opportunities, within what he called a “stable” political environment.
“We recognize our weakness but we try to transform them into strength and opportunities,” he said. “At the same time we are exploiting our comparative advantage. So we invite you to trust Greece. We invite you to trust us.”