Press Release: Statement by the European Commission, the ECB, and IMF on the Fourth Review Mission to Greece

IMF News, June 3, 2011

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Press Release No.11/212; mission concluded on June 3, 2011.
Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) reached staff-level agreement with the authorities on a set of economic and financial policies needed to meet program objectives.
Strict implementation of agreed policies is expected to:
- restore fiscal sustainability,
- safeguard financial sector stability,
- boost competitiveness to create the conditions for sustained growth and employment.
Overall, significant progress has been achieved during the first year of the adjustment program, particularly in fiscal consolidation.
Reinforcement of fiscal and broader structural reforms is deemed necessary to further reduce the deficit and achieve the critical mass of reforms needed to improve the business climate and pave the way for sustainable economic recovery.

The recession in 2010 was slightly more pronounced than what was anticipated.
Encouraging signs recently include a notable pick-up in exports.
Unit labour costs are set to decline further, supporting the strong export dynamics.
Inflation is on a declining trend.
Expectation: the economy to stabilize at the turn of the year.

Further sustained deficit reduction will require comprehensive fiscal structural reforms.
The government has committed to an ambitious medium-term fiscal strategy to maintain its 2011 and medium-term fiscal targets.
Policy measures include:
- significant downsizing of public sector employment,
- restructuring or closure of public entities,
- rationalization in entitlements while protecting vulnerable groups,
- reduction of tax exemptions,
- raising property taxation,
- stepped up efforts to fight tax evasion.

Government commitment to significantly accelerate its privatization program.
Institutional reform: creation of a professionally and independently managed privatization agency.
A comprehensive list of assets for privatization has been drawn up with the aim of realizing revenues of EUR 50 billion by the end of 2015.
Progress will be assessed against intermediate quarterly and annual targets.

Liquidity remains tight, but policies are in place to ensure adequate liquidity provision for the banking system.
The banking sector remains fundamentally sound.
Authorities are increasing capital requirements to further strengthen capital buffers, giving priority to private market-based solutions.
The Financial Stability Fund is available as a backstop for viable banks that cannot raise capital in the private market.

Further progress noted on structural reforms: legislation to modernize public administration, reform healthcare, improve the functioning of the labor market, remove barriers to setting up and operating a business, and liberalize transportation and energy has been passed or is underway.
Government will continue to push ahead, with particular emphasis in coming months on:
- reviving the tourist industry,
- removing administrative barriers to exports.
To ensure effective reform implementation, authorities will:
- strengthen the process of implementation,
- use technical assistance from the IMF, EU Member States, and the European Commission,
- put monitoring mechanisms in place.

Building on the agreed comprehensive policy package, discussions on the financing modalities for Greece’s economic program are expected to take place over the next few weeks.
Once this process is concluded and following approval of the IMF’s Executive Board and the Eurogroup, the next tranche will become available, most likely, in early July.

International Monetary Fund