In a bid to ensure that the budget deficit of Greece is brought below 3% of GDP by 2012, and that the government timely implements a reform programme to restore the competitiveness of its economy, the European Commission has assessed the country’s Stability Programme, and has indeed approved the ambitious budget-deficit reduction targets outlined, as well as the fiscal measures and structural reforms contained in the programme.
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. It includes the elimination of tax exemptions, the rise of excise duties on tobacco and alcohol and measures to fight tax evasion.
The programme also outlines a number of structural reforms aimed at improving the budgetary framework and the efficiency of public spending.
The Commission has also welcomed the recent announcement by the Greek government that it plans to implement a set of additional fiscal measures (concerning the wage bill, excises on fuel and pension reform) designed to safeguard the budgetary targets set in the programme.
It has called on Greece to spell out the announced fiscal measures and implementation calendar and has welcomed its readiness to adopt and swiftly implement additional measures if required. The fiscal measures to be implemented in 2011 and 2012 should also be further detailed.
Implementation of all the measures will be carefully monitored through regular reports to be sent to the Commission by Greece.
European Economic and Monetary Affairs Commissioner Joaquín Almunia announced: "Greece has adopted an ambitious programme to correct its fiscal imbalances and to reform its economy. Yesterday's announcement strengthens the government's commitment to deliver the programme's objectives of more sustainable public finances and a more competitive economy. This is in the interest of the Greek people, who will benefit of better and more durable growth and job opportunities in the future, and it is in the interest of the euro area and of the EU as a whole. The Commission fully supports Greece in this difficult task."
Almunia added: “The Commission will monitor the execution of the budget and of the reforms very closely and regularly and welcomes the Greek government's readiness to adopt further measures as and when necessary”.
On January 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% of GDP in 2010 and thereafter to 5.6% in 2011, 2.8% in 2012 and 2% en 2013.
The Commission has 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% 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.
Given that Greece has failed in its duty to report reliable budgetary statistics, the Commission also plans to initiate infringement proceedings, requesting the government to take all necessary steps to ensure that the systemic failures and weaknesses identified in the recent Commission report are corrected.
The Commission's integrated recommendations will be discussed at the forthcoming Eurogroup and Ecofin meetings.
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