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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
The Second Programme of Economic Adjustment for Greece: Greek commitment, European solidarity
ECON-EMPL – Joint Hearing on Greece – European Parliament
Brussels, 27 March 2012
Dear Sharon, Dear Pervenche, Honourable Members, Dear Colleagues,
Thank you for this opportunity to exchange views on Greece. I also want to thank you for the questions put forward in advance by the political groups, and to which we have sent our joint written responses with the ECB's Jörg Asmussen. They will allow me to keep my introduction brief.
The crisis in Greece is a challenge for the Greek society and for the EU. It is the legacy of years of irresponsible policies. Thanks to European solidarity, we avoided the worst, a social disaster. But the situation remains difficult, especially for the most vulnerable in the society.
The work of the Troika focuses on assisting Greece in rebalancing and restructuring its economy and in improving medium-term opportunities for employment and growth.
Let me stress these words: employment and growth. These are the principal objectives of the economic reform programme of Greece. Following the huge imbalances, the necessary adjustment will take time. Yet, we should not have illusions about the fact that there will be neither growth nor new jobs without a correction of the economic imbalances.
Let us first recall where this all started and why we are here: we would not be having this hearing today, unless the policies of successive governments in Greece had not led to unsustainable macro-economic imbalances, losses in competitiveness and very large fiscal deficits.
In 2008 Greece recorded a current account deficit of 18 percent of GDP, in 2009 a fiscal deficit of almost 16 percent of GDP. As a result, Greece and maybe even the euro area were at the brink of a catastrophe.
This fact – and the looming disorderly default – led Greece to request financial assistance from its euro area partners and the IMF in April 2010. Since then, the Commission, the ECB and the IMF together as a troika have assisted Greece to bring its economy on a sustainable track.
Together with the IMF, the EAMS have now committed 260 billion euro of financing for Greece. Private-sector creditors contribute another 100 billion euro through the debt exchange that reduces the nominal value of their investment by 53.5 percent. As a result of the programme and its financing, Greece now has an opportunity to bring down its debt burden from over 160% of its GDP now to 116% in 2020. It must be used well.
The unprecedented financial solidarity provided to Greece proves that there is a strong political commitment by the governments and the national parliaments of the euro-area to give Greece the time and the means to repair the damage and heal its economic problems. And it is not correct or fair to put blame for the problems Greece is facing on those who have come to help after the damage was done.
We must recognise the progress Greece is making. The Commission has publicly acknowledged that Greece has made major fiscal adjustments under exceptionally difficult circumstances.
It was in the recognition of these efforts why the Troika kept supporting Greece even though the fiscal targets for 2010 and 2011 were not fully met. It was also in recognition of these efforts that the EAMS decided to increase and extend in time the financial support to Greece.
Challenges remain. The current pace of reform and adjustment are far from sufficient to make Greece's public finances sustainable or to close the competitiveness gap. Further efforts are therefore necessary.
The Task Force for Greece is a resource provided by the Commission, put at the disposal of the Greek authorities, as they seek to build a modern and prosperous Greece. It channels technical assistance from the member states' administrations to assist Greece to design and implement reforms needed for a healthy recovery. Our aim is that, as a result, the Greek citizens will enjoy better public services, a fairer taxation system and a better environment for business and investment.
The programme aims at social fairness. The cuts in pensions have been targeted at highest pensions, while protecting the lowest pensions. The reduction in rents in the healthcare system is designed to maximise benefits for the ordinary citizen. The tax system has been made more progressive. And more importantly, the fight against tax evasion is critical for the programme – not only because of additional fiscal revenues, but also for the sake of social fairness and acceptability of the programme.
Greece has committed to the implementation of its economic reform programme, and it should be given the opportunity to implement it.
The first programme for Greece teaches us an important lesson. It had two Achilles' heels. One was the weak administrative capacity of the Greek administration, which did not allow reforms to be pursued with sufficient vigour. Second was the lack of necessary political unity, which is required to mobilise sufficient support for the demanding reforms.
For the second programme, we are mobilising all the assistance we can to support the Greek administration in strengthening its administrative capacity. But the second Achilles heel, the lack of political unity, while improved recently, can only be healed by the Greek citizens themselves.
Ladies and Gentlemen,
One final word on the ownership of the programme. It is a programme of economic reform for Greece – and it is a programme owned by Greece. The troika has helped in its design, and it has been tasked by the creditors, i.e. EA and IMF members, to monitor its implementation, on behalf of those who finance the Greek state by loans of vast magnitude.
In other words, the EU-IMF Troika can facilitate, enable and support – but in the end of the day, it is the Greeks themselves who need to take the action to reform their country and carry the responsibility for it.