Parliament Budget Office Warns about Premature Optimism over Greek Economy

Speaking in the House today, the head of Parliament’s Budget Office warned the government not to create great expectations concerning both the exit from the Greek bailout programme and the growth of the Greek economy.

Panagiotis Liargovas said that a “clean break” from the lenders’ control over the economy is way too optimistic a target, comparing the end of the bailout programme next August to the “start of a honeymoon,” and all the problems associated with it.

“Personally, I would avoid using the term ‘clean exit’ from the programme, because there will still be supervision over the Greek economy, just not as strict as it is now,” he said referring to the optimism relayed by the government.

Liargovas claimed that the country’s upcoming run to the bond market might be successful, but even then, it will come at a high price, interest rate wise. It will also be totally dependent on the IMF/EU deal over Greek debt relief.

Referring to the third and last bailout review which kicked-off last month, he said that a timely conclusion to the negotiations is tied to the credibility of the government’s economic policy, which is dependent on implementing bold reforms.

Liargovas mentioned three targets for the government’s economic agenda in the near future: a new negotiation over the country’s projected primary surplus (on which all parties agree), a re-imagining of the government’s policy of surpassing surplus targets for the sake of social dividends, and a new road map for the next bond market run, so that there would be no unfeasible expectations over an end to fiscal adjustment.

Finally he predicted that even after 2021, the country would have to sustain unfeasible yearly primary surpluses, at least until 2060.