ESM issues warning to Athens

Greece cannot afford any delays in the implementation of its bailout program or another long period of political uncertainty if it wants to see its economy benefit fully from the improvements introduced to the third bailout agreement, the annual report by the European Stability Mechanism (ESM) on Greece warns.

The report described the consequences that the government’s negotiations last year and the political uncertainty that dominated the country in the first half of 2015 have had on the country’s economy. Those negotiations led by the SYRIZA-Independent Greeks coalition “seriously damaged confidence in markets as well as the credit sector.”

The political impasse the government brought the country to further exhausted Greece’s already limited liquidity and fully reversed the growth momentum that had started in 2014 under then prime minister Antonis Samaras.

“If Cyprus emerged stronger from the ESM loan program in March 2016, and other countries that implemented bailout programs are showing particularly positive performances, Greece remains an exception,” says the report by the chief of ESM, Klaus Regling.

The Greek economy stabilized in the second half of 2015 and proved more resistant to pressures than expected. Eurostat confirmed that the primary budget surplus amounted to 0.7 percent of gross domestic product, against forecasts or a primary deficit of 0.25 percent of GDP.

However, “there remain some significant challenges,” the report added, as medium-term fiscal stability must be achieved and tax and social security reforms implemented, while it is essential that the huge stock of nonperforming loans be reduced.

The report also made special reference to privatizations, stressing that they have to be completed “without any political interference,” and that the Greek government must take full ownership of the bailout program, which should also become obvious in its actions, the ESM report said.