Congratulations, Greece — you’re getting the second loan of your bailout.
That is, after the EU, IMF and ECB announced on Thursday that Greece’s experiment in austerity is going, OK so far. Staff teams from the ‘Troika’ of Greece-watchers visited the country during July 26 and August 5, for their first quarterly review of the Greek government’s economic program.
From their joint statement:
Our overall assessment is that the programme has made a strong start. The end-June quantitative performance criteria have all been met, led by a vigorous implementation of the fiscal programme, and important reforms are ahead of schedule. However, important challenges and risks remain.
In the fiscal area, the authorities have kept spending significantly below budget limits at the state level. This has offset slippages caused by problems in controlling expenditures at the sub-national level (local governments, hospitals, social security funds), and the overall deficit target for end-June was met. Going forward, to address potential risks to fiscal targets, it is critical to tighten expenditure control and monitoring, in particular at sub-national levels. Another key challenge is to further strengthen tax administration, including to reduce tax evasion by high-income and wealthy individuals. This is essential to secure tax revenues and to promote the overall fairness of the adjustment program.
Not much to say on Greek banks’ funding problems, by contrast:
In the financial sector, there has been a moderate deterioration in capital adequacy as nonperforming loans have increased in line with expectations. Recently, the CEBS stress tests covered more than 90 percent of Greek banking system assets and all but one state-owned bank passed, thus helping to reduce market volatility…
This bit on improving Greek competitiveness is one to watch though:
Impressive progress is being made on structural reforms. The mission welcomes Parliament’s approval of the landmark pension reform, which is far-reaching by international standards. Substantive labor market reform is also well underway. Implementation of recent tax reform and budget reform is key in order to consolidate fiscal consolidation. Other reforms that are scheduled for early implementation are transportation, where important progress has already been made with liberalization of road haulage, and energy. Restoring competitiveness and boosting potential growth remains critical to the program’s success…
‘Liberalisation of road haulage’. Which sounds so much more reassuring than what actually happened — sending in the army to provide fuel to hospitals and airports, with a national truck-driver strike stopping just short of jamming Greek tourism.
Plus, this is all still very early days for Greece — and who knows how popular this austerity will be on the other side of quarter after quarter of economic contraction.
Still — Daedalus 1, Icarus 0.
Related links:
Europe’s complex crisis, in some simple powerpoints – FT Alphaville
Greece — a marathon to sprint – FT