• Overview of the Economic Survey of Greece
• Remarks by Angel Gurría, OECD Secretary-General

Greece has embarked on an ambitious adjustment programme to deal with the deep economic crisis by restoring sustainable public finances, competitiveness and the foundations for healthy and solid long-term growth. The economic adjustment plan is being implemented with the technical and financial support of the IMF, the European Union and the ECB, and – as announced on 21 July 2011- the participation of Greece’s private sector. It aims at tackling the root causes rather than the symptoms of the crisis.

The programme can succeed. Under conservative assumptions regarding growth and interest rates, and if fiscal and structural reforms are fully implemented, the debt-GDP ratio could peak in 2013 and fall below 60% of GDP in the next two decades. The package announced on 21 July 2011 should ensure reasonable interest rates on Greek debt, contains measures to enhance investment and growth, and will give Greece the time needed to implement reforms which will boost competitiveness and export performance. Despite the short term costs, the reforms that have been implemented or planned will benefit Greece for many years to come, as they will raise growth, living standards and equity. A key prerequisite of success is that the burden and benefits of reform be, and be seen to be, broadly and fairly shared. Clearly, the key to success will be in implementation, which will have to be impeccable. 

The reforms carried out over the past year are impressive. The cuts in the public deficit were unprecedented. Deep-rooted fiscal reforms have been launched to strengthen the management of the public finances and to revamp the pension system. The statistical system is being improved significantly. Labour market reforms will increase employment and help to restore international competitiveness. Red tape and barriers to competition are being cut, which will boost investment and FDI. Although the economy is still weak and the path to recovery is lengthy, rising exports are a sign that the reforms may be bearing fruit.

Long-term debt sustainability: alternative scenarios¹
  

1. Baseline: Long-term potential growth 1.7%. Privatisation and asset development proceeds €15 bn between 2011 and 2017. Scenario 1: Long-term potential growth 2.5%. Privatisation and asset development proceeds assumed at €15 bn between 2011 and 2017. Scenario 2: Long-term potential growth 1.7%. Privatisation and asset development proceeds €50 bn between 2011 and 2017. Scenario 3: Long-term potential growth 2.5%. Privatisation and asset development proceeds €50 bn between 2011 and 2017.
Source:   OECD calculations.

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The authorities should continue this vigorous reform process and their efforts to convince markets of their capacity to implement fundamental economic adjustments. They also should convince the domestic audience of the need to pursue the reforms required to bring public finances to a sustainable path and position the Greek economy for robust growth in the years ahead. Specifically, the authorities should:

• Continue deficit reduction to halt and then reverse the rise in public debt. Strengthening tax collection is urgent.
• Boost privatisation and the development of public assets to reduce the debt burden and associated debt-servicing costs, while stimulating growth.
• Reinforce structural reforms in the labour and products markets to enhance competitiveness and  raise welfare and incomes. This is desirable in its own right, but higher growth will also be instrumental in turning around the public debt.
• Ensure fair sharing of the burden and the benefits of reforms. A firm stance is needed against vested interests trying to protect their rents, and tax evasion needs to be visibly and decisively attacked.
• Enhance monitoring of the progress of reform and improve statistical tools. Policy makers need high-quality economic data and adequate and accurate information on the implementation of measures to assess the reform process, and to convince international observers and the Greek people that reforms are paying dividends.

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