As the Minister of Finance Christos Staikouras pointed out “our country, after 12 years, is returning to European normality and ceases to be the exception in the Eurozone”.
Even closer to the “Holy Grail” for Greece, investment grade recoverythe Greek economy now finds itself after the end of the Enhanced Supervision after the 11 upgrades by rating agencies in the last three years.
After the exit of the country from the regime of enhanced supervision from today, August 20, the freedom of movement of the Greek economy is expanding.
As the Minister of Finance pointed out Christos Staikouras “our country, after 12 years, returns to European normality and ceases to be the exception in the Eurozone”.
Three memoranda and four years of post-memorandum surveillance intervened, with the obligation to fulfill a series of commitments, until the exit from the specific regime took place.
According to the Ministry of Finance, this development closes, in combination with the early repayment of loans from the International Monetary Fund and the lifting of capital restrictions, a painful chapter for Greece, further strengthens the country’s position in international markets, provides additional impetus to the development dynamics and the attraction of investments, it gives degrees of freedom in the exercise of economic policy, within the framework of course of the rules that apply to all European member states and proves the dynamics that the Greek economy has acquired since, despite the unprecedented external difficulties, the country achieves the goals it sets.
Thus, from Sunday, August 21, the country will go into a stadium simple post-program monitoringsimilar to what currently applies in Ireland, Spain, Cyprus and Portugal.
Greece will be able to exercise its economic policy freely, with priorities determined by the government and not by Brussels, while it will be subject to the same control rules to which the rest of Europe is subject.
Henceforth, as announced by the European Commission, the monitoring of the country’s economic, fiscal and financial situation will continue in the context of post-program supervision and the European Semester. Outstanding reform commitments will be monitored in the context of the first post-programme surveillance report to be issued in November this year, on which the Eurogroup’s decision on the final tranche of debt relief measures agreed in June 2018 can be based. Important reforms and investments, also according to the Commission, they are foreseen in the Greek recovery and resilience plan.
Monitoring by the European institutions will continue until 2059, i.e. until the country repays 75% of the loans received under the memoranda. However, the country will move into a stage of simple post-programmatic monitoring, while an evaluation of the course of the economy will be carried out every six months. There will also be an assessment by the European Stability Mechanism every quarter, as is the case for all the countries that borrowed from the ESM, which, however, is not made public, but records the stability of the member states’ economies.
As long as refers to pending matters that must be closed, it is typical that the pandemic and the energy crisis, combined with the war in Ukraine, left a series of prerequisites that could not be completed in the framework of supervision. These are also linked to the disbursement of the last installment from the profits of the Greek bonds. The list includes 22 prerequisites, with a completion date of October (financial sector, liquidation of arrears, reduction of outstanding pensions, primary care, Land Registry, labor law, etc.).
Looking ahead, the expected extension (without the exact terms yet being known) of the escape clause for another year provides fiscal flexibility to take measures to support households and businesses in 2023 as well. of “wounds” that still exist in the economy, the main one being the high public debt, which is expected to decrease to 180.2% of GDP at the end of 2022 (from 193.3% of GDP in 2021). For the period after 2023, countries with debt above 60% of GDP should follow a fiscal policy aimed at achieving gradual debt reduction and fiscal sustainability in the medium term, through gradual reduction of deficits, investment and reforms.
As specifically stated in the Commission’s report for the European semester, member states with high debt, such as Greece, should follow a prudent fiscal policy in 2023, in particular limiting the increase in national current expenditure below the European average , taking into account continued, temporary and targeted support to households and businesses most vulnerable to energy price increases, as well as support to refugees from Ukraine.
The country will seek to create fiscal space through the increase of GDP and revenues with a permanent nature, from which they will be financed the temporary interventions (e.g. Fuel Pass, Power Pass, increased heating allowance, etc.), as well as the permanent measures (e.g. the already reduced ENFIA, or the abolition in 2023 of the solidarity levy for civil servants and pensioners, etc. .a.). But, and be ready to turn to the markets (which will become easier with the acquisition of investment grade) when conditions allow, in order to obtain funds for additional interventions. Keeping in mind, of course, that the “watchful eye” of Brussels will always be focused on public debt and primary deficit (or surplus).
Europe’s reaction
“Greece looks to the future with optimism”
The president of the European Commission, Ursula von der Leyen, the president of the European Council, Charles Michel, and the head of the Eurogroup, Pascal Donahue, refer to Greece’s exit from enhanced supervision with their messages.
“Today marks the end of enhanced supervision for Greece” emphasizes in her post – both in English and in Greek – Mrs. Von der Leyen.
“Thanks to the determination and strength of Greece and the Greeks, the country is now closing this chapter and looking to the future with optimism. The E.U. always by your side” adds the head of the Commission.
🇬🇷 Today marks the last day of the enhanced economic surveillance of Greece.
Thanks to the determination and resilience of Greece and its people, the country can close this chapter, and look to the future with confidence.
The EU will always stand by your side. pic.twitter.com/hDnFd9dqB5
— Ursula von der Leyen (@vonderleyen) August 20, 2022
“Important day for Greece”
The president of the European Council in his message about Greece’s exit from enhanced supervision Charles Michel reads: “An important day for Greece — it is coming out of the enhanced surveillance framework today. A success due to the commitment of the Greek people and the authorities combined with European solidarity. Greece is moving forward.”
An important day for #Greece — exiting the enhanced surveillance framework today.
A success due to the commitment of the Greek people and authorities combined with European solidarity.
Greece is moving forward. @kmitsotakis
— Charles Michel (@CharlesMichel) August 20, 2022
“Significant Achievement”
On his part, Mr Pascal Donahue, in his own message, he notes that “today, for the first time since 2010, Greece is restoring conditions of economic normality by exiting the enhanced supervision”. “This is an important achievement for the Greek government and the citizens,” he adds while describing the role of Prime Minister Kyriakos Mitsotakis and Finance Minister Christos Staikouras as “key”.
Today, for the 1st time since 2010, Greece is restoring conditions of economic normality by exiting enhanced surveillance. This is a major achievement for the Greek government & citizens. Special tribute to @kmitsotakis @cstaikouras for their key role in this success. #Eurogroup https://t.co/uIAEAPwP8Z
— Paschal Donohoe (@Paschald) August 20, 2022
AMPE –
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