ESM’s Regling: Greece must stick to reforms, fiscal targets

The newly-elected Greek government’s reform drive is welcome but the country must respect its post-bailout commitments, the head of the eurozone’s bailout fund said on Tuesday.

Speaking in Athens after a July 7 snap election which the conservatives won promising investments and tax cuts, ESM chief Klaus Regling urged the country to continue with privatisations, reforms and to meet fiscal targets agreed with its lenders.

“The reform drive of the new government to stimulate the business environment and investment climate is welcome,” said Regling.

“Although the government has just been elected and details remain to be seen, what is currently known seems promising to the extent that the country respects the established surveillance framework and its programme commitments,” he said.

Regling also said that any fiscal space should now be used "for growth-friendly measures, including productive expenditures."

"I believe Greece should make growth its top priority while at the same time maintaining the agreed primary surplus and fostering fairness across society. The fiscal surplus is – together with growth – the necessary condition for debt sustainability," he added.

Lokking forward, the ESM official said the government should not reverse reforms in the labor market, should reduce the time needed to resolve legal disputes, improve the effectiveness of public administration, push through with privatizations, stabilize banks, and use social benefits to target the young and working age population.

Regling also warned that reforms slowed in recent months while the "consistency of some policy measures with commitments given to the European partners was not assured."

He said some of these decisions "are likely to have negative consequences on growth – backtracking on past reforms and deciding on new spending increases," while arrears are still higher than expected.

[Reuters, Kathimerini]