Remarks by Angel Gurría, OECD Secretary-General
Athens, 2nd August 2011
(As prepared for delivery)
Minister Venizelos, Ladies and Gentlemen:
We are presenting our 2011 OECD Survey of the Greek economy at a critical time. Greece has embarked on an ambitious adjustment programme to deal with its deep economic crisis by restoring sustainable public finances, competitiveness and the foundations for healthy and solid long-term growth. The programme can succeed. But success will depend on continued reforms and thorough implementation.
Much has been done already. Reforms carried out over the past year are impressive. These achievements are not always appreciated at home or abroad. The 2010 fiscal adjustment of over 5 percentage points of GDP was unprecedented. The pension system was revamped and deep-rooted reforms are changing the management of public finances. Substantive improvements in labour and product markets are changing the business environment. It is now easier to start a company with the one-stop shop system. The Medium-Term Financial Strategy (MTFS) announced last June is yet another strong signal of political will by the Government of Prime Minister Papandreou to deliver the needed reforms.
And the results are starting to show. With rising exports and improved competiveness, we are seeing the first signs that the much needed macro-economic adjustment is gradually taking place.
The agreement by EU leaders on 21 July, by extending maturities and providing stable interest rates for its public debt, allows time for Greece to implement its reform programme. But there is a long and hard road ahead.
Our survey makes a number of key recommendations regarding fiscal consolidation, debt reduction, and competitiveness.
First, Greece must continue cutting the deficit to halt and then reverse the rise in public debt. To achieve this, strengthening tax collection is urgent. Radical measures are needed here. These include increasing public transparency in filing and collecting taxes. It also implies taking a tougher and high profile stance against tax evaders. The message is clear: there is no way out of the crisis without all Greeks contributing their fair share.
Greece needs then to boost privatisation and improve the management of public assets, once again to reduce the debt burden and associated debt-servicing costs. Privatisation will also bring the additional benefit of stimulating growth through greater efficiency and by attracting new foreign investment.
But even more fundamentally, Greece has to accelerate structural reforms in the labour and products markets to enhance competitiveness and raise welfare and incomes. Such structural reforms are the sine qua non of a return to growth. They would help boost exports and investment, and complement other fundamental reforms addressing public sector deficiencies.
We believe the debate should shift from debt to growth, as higher growth is an essential ingredient for debt sustainability. This aspect of the reform package may have received less attention so far in the public debate, as the focus has been on the various debt scenarios. But let us not forget that higher growth can reduce the debt burden as much or even more than any debt workouts or fiscal retrenchment, creating a virtuous circle for a sustainable recovery.
Implementing the current structural and fiscal reform programme, which would boost growth, combined with the ambitious programme of privatisation and improved property management, which would also boost growth, could result in public debt being reduced from 140% today to below 60% of GDP by 2035. This is what makes the full and thorough implementation of the structural reforms so important.
One essential ingredient to succeed in these reforms is to improve statistical tools, in order to enhance monitoring and allow for better public communication of the progress achieved. People need to know that austerity is having results and not just creating short term pain. Policy makers need high-quality economic data and timely, adequate, and accurate information on the implementation of measures. This will allow them to assess the reform process and, crucially, to convince both international observers, but above all the Greek people, that reforms are working.
One way to assess reform progress is to use comparative OECD indicators on product and labour markets. They show how reforms in Greece improve the country’s rating in various dimensions compared to other countries. Another way to inform people about reforms is to say, for instance, how many new enterprises have been created after procedures have been simplified, or how many new firms have opened following the liberalization of closed professions.
However, notwithstanding the quality and intensity of reforms, or the ability to implement them, success will take time and cannot be taken for granted. The Greek authorities now have the time, and the task, to convince markets of their capacity to adopt fundamental economic adjustments.
They also have to inform and convince the Greek people of the need and the long-term benefits of bringing public finances to a sustainable path. This would prepare the Greek economy for robust growth in the years ahead. The short term pain, which cannot be denied, should be seen against potentially large, medium and long term gains.
Needless to say, one key prerequisite for success is that the burden and benefits of reform be, and are seen to be, broadly and fairly shared. This is critical. And it requires a firm stance against vested interests.
The Survey also deals with reforms in the financial sector, state-owned enterprises, pensions, health care, employment and unemployment, competition, environment, export promotion, professional services, network industries and others which, together, are key for a medium and long term sustained growth. I invite you to read the recommendations carefully.
Ladies and gentlemen,
The effort being asked of Greece and the Greeks is very meaningful, although not without precedent. Denmark, Finland, Belgium, New-Zealand and Greece itself, not so long ago, between 1989 and 1995, proved that it was possible.
The challenges remain substantial. But a shared commitment across Greek society to the fundamental economic changes needed should help bring an end to the uncertainty and the crisis mood of the last few months. With these structural reforms strongly, relentlessly and fairly implemented, the Greek economy will recover growth and enter a virtuous circle for a sustainable recovery.
Mr. Minister, you can count on the OECD to help you design, promote and implement better policies to achieve better lives for the Greek people.