Athens News Agency: News in English, 10-02-03

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From: The Athens News Agency at <http://www.ana.gr/>

CONTENTS

[01] Almunia on Stability Program

[01] Almunia on Stability Program

Speaking to reporters, the Commissioner said the European Commission supported and has confidence in the Greek programme and stressed that in order to achieve these ambitious goals it needed the support of all political and social groups in Greece.

Commenting on the European Commission's recommendations over Greece's updated Stability Programme, Almunia emphasized that changes are needed in the health system, the pension system and in the goods and services markets, while he stressed that Greece and Portugal are facing major problems with their external trade balances.

He added that the EU's executive would closely monitor implementation of the programme and stressed that the Greek government should be ready to take additional measures if there was any deviation from its goals. Commenting on Greek premier's speech a day earlier, Almunia said George Papandreou's announcements were moving towards the right direction, adding it was urgent that reforms begin from the first quarter of the year so that they bear fruits within the year.

The EU Commissioner said if the Athens adheres to its programme then international financial markets would improve their stance vis-à-vis Greece in the short-term, while he expressed confidence that any problems plaguing Greece would be resolved within the Eurozone.

Almunia declined to comment on reporters' questions over plans to issue a euro-bond.

On Jan. 15, the Greek government submitted to the Commission its stability programme for the period 2010-2013 which envisages reducing the budget deficit by 4 percentage points to 8.7 percent of GDP in 2010 and thereafter to 5.6 percent in 2011, 2.8 percent in 2012 and 2 percent en 2013. The programme contains a package of concrete fiscal consolidation measures for 2010, with an estimated quantification for each of the measures, as well as a timeframe for their adoption and implementation. On the revenue side it includes the elimination of tax exemptions, the rise of excise duties on tobacco and alcohol and measures to fight tax evasion. Regarding expenditure, the government will cut public servant allowances, freeze recruitment in 2010 and will only recruit 1 for every 5 civil servants retiring thereafter. The government has also set up a contingency reserve and frozen all budgetary appropriations per ministry by 10 percent and already adopted nominal cuts in public consumption and operational expenditure. The programme also outlines a number of structural reforms aimed at improving the budgetary framework and the efficiency of public spending, enhancing investment and improving the functioning of labour and product markets. After the submission of the stability programme, the Greek government announced further measures concerning public wage, excises on fuel and pension reform. The Commission asked Greece to spell out the implementation calendar of these measures within one month. The plans for 2011and 2012 also need to be detailed in the coming months.

Given the state of the public finances in Greece and the persistent external imbalances, which result from accumulated competitiveness losses, and in order to allow for simultaneous discussion by the Council of fiscal policy and structural reforms, an integrated approach to the enhanced surveillance mechanism is being adopted.

The Commission recommended to the Council that Greece adopts a comprehensive structural reform package aimed at increasing the effectiveness of the public administration, stepping up pension and healthcare reform, improving labour market functioning and t he effectiveness of the wage bargaining system, enhancing product market functioning and the business environment, and maintaining banking and financial sector stability . This recommendation is made under Article 121(4) of the Treaty, ' with a view to ending the inconsistency with the broad economic policy guidelines and the risk of jeopardising the proper functioning of the monetary union'. The recommendations are largely included in the stability programme but require clarification in some cases.

The Commission has also adopted a recommendation under Article 126.9 of the Treaty on the excessive deficit procedure (formerly 104.9), whereby Greece is required to follow the adjustment path outlined in the 2010 stability programme in terms of nominal deficit, structural deficit and change in debt levels, and detail the measures to be implemented. The recommendations include measures to be implemented already in 2010, such as a reduction in the overall public sector wage bill, including through the replacement of only 1 of 5 retiring civil servants, progress with healthcare and pension reforms, the set up of a contingency reserve amounting to the 10 percent current expenditure, tax and excise duties increases and tax administration reform. In the medium term, Greece is required to implement further adjustment measures of a permanent nature, continue with tax administration reforms and improve the budgetary framework.

Greece is required to submit a first report in mid March 2010, spelling out the implementation calendar of the measures to achieve the 2010 budgetary targets, standing also ready to adopt additional measures if needed, and quarterly integrated reports from mid May 2010 on the implementation of the recommendations, including on the reforms.

The Commission's integrated recommendations will be discussed at the February Eurogroup and ECOFIN meetings.

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