Able to extinguish it debt it is Greece, according to its post-program surveillance report committee.
The Commission’s report, which assesses the economic, fiscal and financial situation of member states with previous MoUs, focusing on debt repayment capacity, said Ireland, Greece, Spain, Cyprus and Portugal also guarantee: do so.
The assessment of the commission regarding the course of debt and fiscal deficit is positive. Specifically, it forecasts that the general government debt ratio is expected to continue to decline in 2024 and remain on a downward trajectory. The overall fiscal deficit is expected to improve to 1.2% of GDP in 2024 and 0.8% in 2025.
However, it is noted that imbalances have been identified in Greece and Italy, although they previously had excessive imbalances until last year, as vulnerabilities have decreased but remain a concern.
It is also noted that fiscal stability risks in the context of new fiscal rules.
It is said that the Commission’s assessments will form the basis of a national proposal for discussion, which Greece will submit to Brussels on spending limits and the level of debt reduction as goals for the next four years, which is expected in September.
Commission proposals
The in-depth review reveals (extreme) macroeconomic imbalances in four areas: high public debt and a high stock of non-performing loans, a weak external position and high unemployment.
Greece’s long-standing vulnerabilities are receding on all fronts in 2023, but they require further adjustment and close monitoring. Total government debt was 161.9% of GDP in 2023, down from 207% in 2020, and is expected to decline.
The current account deficit, which widened significantly between 2020 and 2022, narrowed by a third to 6.3% of GDP in 2023, largely supported by favorable developments in export and import prices, but remained well above its pre-crisis level.
The unemployment rate has been declining since 2013 and is expected to continue its downward trend, albeit at a slower pace. The stock of non-performing loans on banks’ balance sheets has also declined, but there has been limited progress in consolidating the portfolio of non-performing loans held by servicers, which continues to weigh on the economy at 31.5% of GDP.
Economic conditions, as well as comprehensive reforms, have allowed Greece to reduce debt ratios while strengthening the financial sector.
Further measures to address imbalances will include strengthening tax collection, improving the investment efficiency of the tax system, increasing the efficiency of public administration, supporting effective domestic investment, increasing market participation and employment, enhancing competitiveness by addressing key skills shortages, strengthening public asset management and completing the environmental permitting regulatory framework and to support the continued reduction of the stock of non-performing loans, inter alia, by further improving e-auction processes to reduce the rate of failed auctions.
Sustained policy actions have significantly reduced risks to fiscal and financial stability and improved growth and labor market outcomes. The government debt ratio has decreased significantly and a significant primary surplus has been achieved.
Continued monitoring within the IMF is warranted as there are some vulnerabilities, including in the current account.
Greece has large cash reserves and has maintained its presence in the government bond market amid narrowing yield spreads driven by recent investment grade hikes. The general government debt ratio is expected to continue to decline in 2024 and remain on a downward trajectory. The overall fiscal deficit is expected to improve to 1.2% of GDP in 2024 and 0.8% in 2025.