The European Commission announced on Thursday that Greece has met the requirements to be granted the second tranche of a $145 billion bailout scheme. Economic and Monetary Affairs Commissioner Olli Rehn praised Greece for its fast economic reforms but warned of possible problems during the rest of 2010.
The second tranche, totaling $11.5 billion will be provided by the other 15 eurozone members and the International Monetary Fund (IMF).
“Greece has managed impressive budgetary consolidation during the first half of 2010 and has achieved swift progress with major structural reforms,” said Rehn. “Despite the significant progress made, challenges and risks remain.”
After coming to terms with a huge debt of nearly $400 billion earlier this year, Greece asked its European counterparts for financial aid. The debt was blamed on decades of state mismanagement, topped by unchecked employment, and generous pay increases in the country’s gigantic bureaucracy. Mass protests and week-long strikes ensued throughout the country against the declared draconian cuts in public expenditures by the government.
According to the European commissioner, the Greek government now faces the difficulties of safeguarding adequate liquidity and financial stability of the banking sector. At the same time, its structural reform agenda needs to be pressed ahead to unleash the huge potential for promoting growth.
The second tranche, totaling $11.5 billion will be provided by the other 15 eurozone members and the International Monetary Fund (IMF).
“Greece has managed impressive budgetary consolidation during the first half of 2010 and has achieved swift progress with major structural reforms,” said Rehn. “Despite the significant progress made, challenges and risks remain.”
After coming to terms with a huge debt of nearly $400 billion earlier this year, Greece asked its European counterparts for financial aid. The debt was blamed on decades of state mismanagement, topped by unchecked employment, and generous pay increases in the country’s gigantic bureaucracy. Mass protests and week-long strikes ensued throughout the country against the declared draconian cuts in public expenditures by the government.
According to the European commissioner, the Greek government now faces the difficulties of safeguarding adequate liquidity and financial stability of the banking sector. At the same time, its structural reform agenda needs to be pressed ahead to unleash the huge potential for promoting growth.
The socialist government of George Papandreou was hailed by Rehn for its significant achievements in terms of state spending cuts: during the first half of 2010 they were down by 46 percent on a yearly basis, a figure higher than expected.
Total state cash spending was reduced by 16.9 percent compared to the first half of 2009, reflecting mainly reductions of public wages, along with lower capital expenditure.
However, Greece is still falling behind in terms of cash revenues, which increased by 5.9 percent in the first half, well below the target of an annual 15.6 percent increase.
Commissioner Rehn has recommended taking quick measures against tax evasion such as the census of civil servants and setting up a single payment authority for public wages. Privatization and restructuring of state-owned companies, in particular in the areas of rail transport and energy, need to be sped up.
While Greece has met the requirement for the next installment of bailout money, the final decision as yet to be made by the eurozone finance ministers who will meet in Brussels on Sept. 7.
The Greek government is confident that the funds will be extended, despite the fact that Greek economy has shrunk by 1.5 percent during the second quarter of 2010, continuing the negative trend for a seventh consecutive period.
Greece remains the only eurozone member out of 16 European Union countries, with negative growth.
Total state cash spending was reduced by 16.9 percent compared to the first half of 2009, reflecting mainly reductions of public wages, along with lower capital expenditure.
However, Greece is still falling behind in terms of cash revenues, which increased by 5.9 percent in the first half, well below the target of an annual 15.6 percent increase.
Commissioner Rehn has recommended taking quick measures against tax evasion such as the census of civil servants and setting up a single payment authority for public wages. Privatization and restructuring of state-owned companies, in particular in the areas of rail transport and energy, need to be sped up.
While Greece has met the requirement for the next installment of bailout money, the final decision as yet to be made by the eurozone finance ministers who will meet in Brussels on Sept. 7.
The Greek government is confident that the funds will be extended, despite the fact that Greek economy has shrunk by 1.5 percent during the second quarter of 2010, continuing the negative trend for a seventh consecutive period.
Greece remains the only eurozone member out of 16 European Union countries, with negative growth.
