November 21, 2018 / 11:41 AM / a month ago

EU Commission clears Greek budget, but sees need for speedy reform

ATHENS (Reuters) - The European Union’s executive gave the thumbs-up to Greece’s first post-bailout budget on Wednesday, but said the country had to speed up reforms to qualify for any future disbursements under debt relief measures.

A Greek and a tangled EU flag flutter atop Greece's Financial Ministry in Athens, Greece, November 21, 2017. REUTERS/Costas Baltas

The European Commission said it had adopted its first report for Greece under a close monitoring programme put in place after the concussion of its bailout programme in August.

But it said activation of some debt relief measures, agreed by euro zone finance ministers in June, would depend on how well Greece performed in the future when it was re-assessed.

The country is due about 4.8 billion euros (4.3 billion pounds) of profits from Greek bonds held by the European Central Bank and other eurozone central banks in semi-annual tranches, as agreed with lenders under its post-bailout agreement.

Greece required three international bailouts between 2010 and 2015, lurching from one crisis to the other as the effect of deep reforms coupled with austerity and recession kicked in. It returned to steady growth in 2017, after nine years of recession saw its economy shrink by a quarter.

Presenting its final 2019 budget on Wednesday, vetted and approved by the European Commission, Greece said it targeted a primary surplus target of 3.6 percent of GDP next year without implementing legislated pension cuts.

Labour Minister Effie Achtsioglou told Reuters that the Commission’s approval clearly confirmed that Greece was done with bailouts and austerity.

“This government is now free to decide the policies it adopts and it implements,” Achtsioglou said. “The fact that we are proceeding to cancel this measure .. vindicates this government’s position that the measure was unnecessary and confirms anew that the pension system is viable long term.”

MIXED REFORM PROGRESS

Greece remains under monitoring by the EU and International Monetary Fund to ensure it stays on target, and must stick to surplus targets excluding debt servicing costs in the coming years. It must also remain committed to implementing reforms.

The Commission on Wednesday gave a mixed picture of reforms, with some privatisation projects scheduled to be completed by the end of 2018 making good progress but noted ‘significant’ delays in projects earmarked for next year.

Banks were burdened with a heavy legacy of the crisis, with non-performing exposures high, it added.

Greece’s central bank was widely expected on Thursday to present an asset protection scheme to help its banks offload billions of sour loans from its balance sheets and beat a deadline set by regulators for the end of 2019.

The government of Prime Minister Alexis Tsipras, facing elections by October 2019, plans some tax relief for 2019, including a reduction in property taxation and corporate tax.

Additional reporting by Angeliki Koutantou; Writing by Michele Kambas; Editing by Richard Balmforth

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