‘Greece may miss debt target’
BERLIN, Germany – Greece’s international creditors see “significant risks” that the country might fail to bring down its debt burden within targets, meaning it would require more rescue loans.
In a document seen by The Associated Press yesterday, they say Greece’s programme of austerity measures and structural reforms “could be accident prone.”
“Authorities may not be able to implement reforms at the pace envisioned,” said the report by the International Monetary Fund, the European Commission and the European Central Bank.
The Greek programme could lower debt to 116.5 per cent of GDP by 2020, but the minimum target set by the bailout creditors is 120.5 per cent by 2020.
On top of concerns that reforms are too slow, the Greek economy faces a grim outlook. It is in its fifth year of recession and would need to recover before debt reduction plans can have much effect.
The Bank of Greece predicts the economy will contract another 4.5 per cent in 2012 and remain in recession next year, while unemployment will surpass 19 per cent on average this year.
Overall, the bailout creditors’ report sees a risk that the program would bring debt down to only 145.5 percent of GDP by 2020, even after taking into account losses accepted by private creditors.
“Stress tests point to a number of sensitivities, with the balance of risks mostly tilted to the downside,” said the report dated March, 11.
“Greater wage flexibility may in practice be resisted by economic agents; product and service market liberalization may continue to be plagued by strong opposition from vested interests; and business environment reforms may also remain bogged down in bureaucratic delays,” it reads.
Moreover, Greece is heading toward a general election in late April or early May, likely causing further delays to reforms. A new government might also seek to change the terms of the bailout programme.