One year without financial assistance programme to Greece

On August 20, 2018, Greece successfully concluded its third and final economic adjustment programme. The first financial assistance programme started in May 2010, followed by the second programme in March 2012, and finally the third programme which began in August 2015. Greece is now into post-programme monitoring.

   Greece’s financial assistance programme ended after 8 years. The Eurogroup acknowledges the significant efforts made by the Greek citizens over the last years. However, in this context the Eurogroup forced Greece to maintain a great primary surplus and, thereafter, to continue to ensure that its fiscal commitments are in line with the EU fiscal framework.

   They forced Greece to maintain a primary surplus of 3.5% of GDP until 2022, and a primary surplus of 2.2% of GDP on average in the period from 2023 to 2060!

   The Eurogroup stressed that debt relief measures should include incentives to ensure a strong and continuous implementation by Greece of the reform measures agreed in the programme. Economic developments and policies in Greece are monitored under the European Semester for economic policy co-ordination and under the enhanced surveillance framework according to Regulation (EU) No. 472/2013.

   Greece is out-performing only 6 out of 11 key performance indicators made and monitored by Intra-European Organization of Tax Administrations (Independent Authority for Public Revenue, IAPR, Ανεξάρτητη Αρχή Δημοσίων Εσόδων (ΑΑΔΕ)).

   For instance, banks’ private sector deposits have slightly increased since the end of the ESM programme, while reliance on central bank funding has significantly decreased. A further loosening of capital controls as of October 1, 2018, helped improving liquidity situation of Greek banks, but slightly increased the confidence of depositors.

   After the successful bond issuance in January, Greece tapped the markets for a second time in March 2019. Credit institutions improved Greece’s credit rating by some notches since 2018, acknowledging the consolidation of the economic recovery.

   Finally, according with the debt sustainability analysis that has been carried out earlier this year, as the Enhanced Surveillance Report stated in June, 2019, the baseline scenario shows that debt will remain on a downward path (save for the capitalization of the deferred interest in 2033), but remains above 100% of GDP until 2048. Also, a technical update of the adverse scenario shows that debt starts rising again after the mid-2030s.

   Under the baseline scenario, Greece’s gross financing needs (GFN) are set to hover around 10% of GDP until 2032. Thereafter, the GFN start to increase slowly, but are projected to remain around 17% of GDP at the end of the forecast horizon. In the adverse scenario, the GFN reach 20% in 2041 and increase further thereafter.