–Concerns About Lack Of Information, Greek Banks Linger
–Economic Downturn Will Keep Unfolding Coming Months
BRUSSELS (MNI) – Greece’s efforts to cut its budget deficit are
broadly on track but there are concerns about a lack of information and
the health of the country’s banking system, the European Commission said
In an unofficial report published after representatives from the
European Commission, the European Central Bank and the International
Monetary Fund visited the country, the mission said that the Greek
economy is developing in line with expectations, but that concerns
lingered about the economic outlook and the health of the banking
“The overall assessment was positive, with programme implementation
being broadly on track,” the Commission said. However, “a number of
pressure points and areas were identified, with the authorities
expressing their commitment to address them.”
In exchange for loans worth E110 billion over three years, Greece
said it would implement an unprecedented austerity plan which would see
it cut its budget deficit to 8.1% of GDP by the end of this year from
13.6% in 2009. The deficit ceiling of the EU’s Stability Pact is 3% of
“Macroeconomic developments are broadly in line with the
macroeconomic scenario underlying the programme, though inflation is
markedly higher than projected,” the report said.
“The economic downturn should keep unfolding in the coming months,”
the report predicted. In May, business sentiment indicators “remained
very negative and showed a further deterioration in industry, services
and retail trade.” The negative sentiment in construction is unchanged
and consumer sentiment surveys in April and May indicate weakening
private consumption, it noted.
“Fiscal consolidation is ongoing, broadly in line with plans,” the
report said, while admitting that detailed data were lacking.
“No complete set of information and data is available for outside
the central government, including sectors that used to lead to large
expenditure overruns in the past, such as health care,” the report said.
The report also said the Greek banking system has been affected by
the recent downgrades of sovereign and bank debt.
“In order to safeguard the credit institutions’ liquidity position
over the coming months, the government contemplates putting into place
another tranche of the government guarantee scheme,” it said.
Of the E110 billion aid programme, Greece has received E14.5
billion from the Eurozone members and E5.5 billion from the IMF.
In order to get the second instalment, expected to be given in the
first half of September, the country must prove it is meeting its
targets. A formal assessment of this will be made at the end of July and
the beginning of August, the Commission said.
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