Remarks by Angel Gurría, OECD Secretary-General
27 November 2013, Athens, Greece
(As prepared for delivery)
Minister Stournaras, Ladies and Gentlemen,
I am delighted to be back in Athens to present an important body of work geared towards helping Greece chart a course for its future.
This afternoon, we are launching the OECD’s Economic Survey of Greece 2013. I would like to take this opportunity to thank Minister Stournaras for the support he and the Ministry of Finance have shown and for his commitment in seeing this project to fruition.
We are half a decade into the longest, deepest economic crisis. But there is hope on the horizon, and 2014 promises to be a turning point for Greece. By this time next year, we hope to see the Greek economy recovering, before achieving a positive growth rate in 2015.
There is no doubt about the efforts of the Greek authorities to reform the economy and balance the budget. Between 2010 and 2012, Greece reduced its budget deficit by nine percentage points of GDP, the largest ever adjustment by an OECD country and one which looks set to deliver a primary surplus this year. Over the same period, no OECD country has introduced more far-reaching reforms in health care, the labour market, the pension system and the banking sector, to name but a few.
The costs and benefits of reform must be fairly distributed
The adjustment that Greece is going through is posing an enormous cost on society. Real disposable incomes have fallen by about 30% since the crisis hit. Unemployment is still at a historical high of almost 28%, and youth unemployment stands at almost 60%. Poverty is also on the rise, despite efforts by the government to distribute fairly the burden of fiscal consolidation: in 2012 more than 15% of the population earned less than half of the median income, a marked increase of 1.5 percentage points in relative poverty over the previous year. Many Greeks are now facing hardship and losing faith in the ability of policymakers and the government to steer their country out of the crisis.
For the reform efforts to succeed and be accepted by the citizens, it is imperative that both the costs and the benefits of adjustment are shared fairly. Minister Stournaras and his predecessors have worked to ensure that the burden of fiscal adjustment falls heaviest on those best able to pay.
By far, the best way of ensuring that growth is as inclusive as possible is to get people back to work while protecting the most vulnerable. Given stringent fiscal constraints, this means targeting resources where they are needed most.
In our Economic Survey, we welcome the imminent launch of the means-tested minimum income pilot programme, and hope that it will be fully implemented soon across the country. We also recommend the introduction of subsidised, means-tested school meals and a well-targeted housing benefit.
Ensuring that everyone pays the taxes they owe and that social programmes are not abused is crucial in restoring trust in government. Efforts towards streamlining the public administration will also help convince people that resources are being put to the best possible use.
And in order to help bring down unemployment, you need to speed up the restructuring of the public employment service and place greater and more strictly enforced obligations on people receiving unemployment benefits. This will become increasingly important as the economy recovers.
The reform momentum must be maintained
Every passing day we see that Greece is doing everything it can to get its economy growing again, and it must continue on the reform path to make its private sector as dynamic and competitive as possible. It is, at this time, essential for the Greek authorities to fully implement the reforms that have been legislated for in order to ensure that the progress made to date is not jeopardised and that the reform momentum is maintained.
We are working hard with the Greek authorities on several fronts to help with the implementation of the reform package. Earlier this afternoon I launched the OECD Competition Assessment Review of Greece with Minister Hatzidakis. The report focuses upon improving the business environment in Greece and creating jobs by reducing unnecessary red-tape and eliminating harmful barriers to competition.
Later today, together with Minister Mitsotakis, we will be presenting our important work on reducing administrative burdens in Greece, a project which is expected to be finalised early next year and which aims to relieve regulatory burdens by up to 25% in 13 sectors, generating an estimated total of 1.8 billion Euros in annual savings for businesses.
Access to credit is an on-going challenge for the private sector, particularly SMEs. Sweeping and largely successful reforms in the banking sector have as yet done little to get credit flowing to small businesses that need it to grow and prosper. Banks with large portfolios of bad assets are more concerned with dealing with legacy loans than granting new credit. The next steps in banking reform must therefore promote bolder debt-workouts so that banks can get back to the business of lending. Measures to improve the insolvency framework would also help ease access to credit.
Europe needs a reality check on debt sustainability
Most of the hard work on fiscal consolidation is behind you. But, as policymakers, we must hope for the best, while preparing for the worst. In truth, the adjustment programme agreed in 2010 has not yielded the expected results in restoring activity, and this has worsened the debt problem, despite the debt restructuring that took place in 2012.
If Greek growth again disappoints, or if deflation persists, then it will be extremely difficult to reach the debt-to-GDP target of 120% by 2020 and in this case, serious consideration should be given to reducing further the current debt burden. This is a possibility that we must be prepared for. In practice, it may involve official sector involvement (OSI) for the first time; it is not something I would contemplate lightly, but it does reflect the reality of the Greek economic experience over the past six years.
Let me also stress that any kind of debt relief must not become a substitute for the implementation of structural reforms. It is structural reforms that will prepare Greece for a stronger recovery and stronger growth in the future. And, most importantly, it is structural reforms that will equip the Greek population to share in the benefits of future growth in terms not only of increased prosperity but also wellbeing and inclusiveness.
Ladies and Gentlemen:
The government and citizens of Greece continue their arduous efforts to put the economy back on a sustainable path, despite seemingly insurmountable challenges. We are fully aware that Greece is going through a radical and painful adjustment. The implementation of reforms is key to getting through this tough period and ultimately equipping people with the tools they will need to share the benefits of growth.
The Economic Survey I have presented today, along with the other projects we have been working on together, reflect our shared aspirations and joint efforts to achieve our goal of a dynamic and inclusive Greek economy. So let’s keep strengthening our collaboration, our Greece – OECD partnership, to deliver better policies for better lives.
Greece: Structural reforms under way but more progress needed in boosting market dynamism