Troika officials on Friday gave the “green light” to releasing the first tranche of an 110-billion-euro loan facility to Greece, probably in early July. In a statement, issued by troika officials after completion of the regular review of the Greek economic program, the EU, ECB and IMF officials said they have reached an agreement with the Greek government over a package of economic and financing policies, necessary to achieve the goals set by an economic programe.
A strict implementation of these policies will help in restoring fiscal sustainability, preserving the stability of the financial sector and give a boost to competitiveness, creating preconditions for a sustainable growth and employment, the statement said.
The commitments undertaken by the Greek government in the framework of an economic programe, envisage:
-a significant reduction of employment in the public sector, the restructuring or closure of public agencies and a rationalization of all social benefits, along with protecting the most vulnerable groups of the population. The government will also cut tax breaks, raise taxes on real estate property and intensify efforts to combating tax evasion.
-accelerating a privatization program and exploiting state property. The government will set up an independent privatization fund, with the aim to raise 50 billion euros from privatizations by end-2015.
-Significant progress has been made in structural reforms. The government will continue efforts towards this goal emphasizing more on growth factors, such as revitalizing the tourism industry and abolishing all administrative hurdles in exports. These efforts will be strengthened with technical assistance offered by the IMF, the EU and the European Commission.
Greek banks continue suffering from lack of liquidity, although measures have been taken to ensuring the necessary liquidity in the financial system. The banking sector remains basically healthy, with Greek authorities introducing stricter capital adequacy criteria, with priority given to solutions based on private initiative.
However, a Fiscal Stability Fund is available for viable banks that cannot raise capital from the private market.
On macro-economics, the troika said that an economic recession in 2010 was slightly worse than initial estimates, although encouraging signs came up recently, such as a remarkable progress in exports.
Labor cost/per product unit is expected to fall further, supporting a strong export dynamism, while the inflation rate is steadily falling. The troika expects the economy to stabilize by the end of the year.
The statement underlined that significant progress has been made during the first year of an adjustment program, particularly on fiscal consolidation. However, it was necessary to revitalize fiscal and wider structural reforms to further cut a fiscal deficit and creating a critical mass of reforms needed to improve the business environment in the country and preparing the ground for a sustainable economic recovery.