The Economic Adjustment Programme for Greece – Fourth Review – spring 2011

A joint Commission / ECB / IMF mission met with the Greek authorities in Athens from 3 May to 2 June, and 21 to 23 June 2011. The mission assessed compliance with the terms and conditions of the Fourth Review under the Economic Adjustment Programme.

The report contains in annex the following updated programme documents:

the Memorandum of Economic and Financial Policies (MEFP);
the Memorandum of Understanding on Specific Economic Policy Conditionality (MoU);
the Technical Memorandum of Understanding (TMU)
Full and timely implementation of the comprehensive policy package agreed during the mission should ensure further progress towards fiscal consolidation, financial stability and improved competitiveness. In particular, the ambitious medium-term fiscal strategy and the enhanced privatisation programme are expected to keep the economic adjustment programme on track. However, there are significant implementation risks, which, if not properly addressed,would endanger the success of the programme in restoring competitiveness and debt
sustainability.

A number of pre-conditions are necessary for the adjustment process to be successful. The programme of fiscal, financial and growth-enhancing reforms needs to be strictly implemented. Privatisation has to accelerate. Given the length, magnitude and nature of required reforms, political and social consensus remains a prerequisite for success. Weaknesses in institutional capacity will need to be addressed through enhanced technical assistance.

Against this background, a reinvigorated economic adjustment programme with scaled up financing assistance appears necessary. While noting the responsibility of the Greek government and other stakeholders to contain implementation risks identified in this report, the Commission services recommend this disbursement to take place, and at the same time to set up the main parameters for a new financing programme.