Greece has reached agreement with international lenders after drawn-out negotiations on reducing the civil service payroll and curbing tax evasion, opening the way for the disbursement next month of a €2.8bn aid tranche delayed since March.
The so-called “troika” statement by the European Commission, European Central Bank and International Monetary Fund said that Athens was on track to meet fiscal targets this year and had made “important progress on measures to improve tax and debt collection”.
Antonis Samaras, the prime minister, said in a televised message to the nation on Monday: “We’re finally meeting our targets . . . Greece’s competitiveness is being restored.
“I’m not saying – far from it – that the difficulties have been overcome. But the situation has begun to change, and this improvement will soon become clear to more people.”
Yannis Stournaras, finance minister, said he expected Greece to achieve a primary budget surplus, before making debt repayments, this year even though recession will be deeper than projected, with the economy forecast to shrink by about 5 per cent before starting to recover in 2014.
That would allow the government to seek the adoption of additional measures to reduce the public debt under a deal agreed with eurozone finance ministers aimed at ensuring the long-term sustainability of Greek debt.
“Achieving a primary surplus is now the overriding target, so that we will be in a position to activate the clause [in Greece’s current bailout deal] calling for drastic reduction of the public debt,” Mr Stournaras told a conference in Athens.
The governing coalition has agreed to eliminate 14,000 civil service jobs by the end of 2014 and sack several thousand public servants found guilty of offences ranging from bribe-taking to presenting forged diplomas after resolving a long-running internal dispute over reducing the size of the public sector.
The centre-right New Democracy party eventually overcame opposition from its junior partners, the Socialists and the Democratic Left, after opinion polls showed increasing anger over a perceived reluctance to cut civil service jobs at a time when more than 1m private sector workers are unemployed.
The government won praise from the troika for backing reforms giving more autonomy and resources to revenue authorities, including a senior official recently appointed to tackle tax evasion by large businesses and self-employed professionals.
“This was a major focus of the mission given the importance of improving tax collection and reducing the scope for evasion and corruption, in order to ensure a more balanced and fair distribution of the adjustment and to support the achievement of fiscal targets and minimise the need for further adjustment measures,” the troika statement said.
But Poul Thomsen, head of the troika mission to Greece, warned the burden of adjustment had fallen too heavily on private sector wage earners.
“Too many of the rich and self-employed are not paying their fair share of taxes,” he told the same conference that Mr Stournaras addressed. “And there is still a taboo on dismissing people from the public sector.”
The EU-IMF programme had “disappointed” on the liberalisation of product and service markets with prices remaining stubbornly high, despite sharp falls in wages over the past three years, he added.
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