The Greek Minister of Finance, Yiannis Stournaras was stunned by the findings of the Organisation for Economic Co-operation and Development’s report concerning the course of the Greek economy. Besides the prediction of further recession (0.4 percent) during 2014 — a prediction that caused a public debate between Greece’s side and OECD’s secretary general — the economists of OECD also predicted that by 2020 Greece’s debt pile will stand at the astronomical levels of 157 percent of GDP in contrast to 124 percent that Troika is expecting.
The basic acceptance of this shocking prediction is that the Greek economy will suffer from a low-level inflation or better from deflation, meaning that GDP will stand at lower levels from those predicted from the Sustainability Report. Consequently, those who are in favor of a new “haircut” of Greece’s debt, now insist that it is the only way to help Greece’s economy strive.
In particular, OECD for 2020, predicts a negative inflation of 0.6 percent that will result in a real GDP of 2.1 percent instead of the 2.9 percent as it was initially predicted by Troika. These predictions of OECD are based on the instability of the International Market which does not allow a big increase in investments.
This scenario “incorporates” the activation of automatic stabilizers. Thus, the rhythm of fiscal adjustment will drop at a lower level of development and as a result it is estimated that the goal of a 4.5 percent primary surplus will be achieved no earlier than 2018.
From the first lines of OECD’s report, it is mentioned that Greece’s side must fully adopt all the scheduled reforms, as it is the only way for Greece to recover from the recession. However, if the application of the reforms is not fruitful, a message will be sent to Greece’s partners, that a new economic package would be necessary in order for the Greek economy to flow.
Angel Gurria: “There is Life After Debt”
Earlier today, Angel Gurria, the secretary-general of the OECD, visited Greece to meet with the Greek Prime Minister, Antonis Samaras, at the Maximos Mansion and to present the organisation’s report on the country’s handling for the ongoing crisis.
The head of the OECD congratulated Antonis Samaras and praised the country’s efforts to find its way out of the crisis pointing out that Greece comes first on a list that concerns structural reforms.
Before his meeting with the Greek premier, Mr. Gurria also met with PASOK’s chief and Deputy Prime Minister, Evangelos Venizelos. After their conversation over Greece’s “impressive adjustment program” and the “spectacular reversal in the balance of payments” as Mr. Gurria mentioned, he also added that “there is life after debt” commenting on the country’s primary surplus. Meanwhile Mr. Venizelos, when talking to the press, stated that the OECD report points out the fact that the Greek debt is sustainable.
Moreover, Mr. Gurria’s program for the day included meetings with Minister of Finance, Yiannis Stournaras, and the Minister of Development, Costos Hatzidakis, as well as a speech that he is expected to deliver at the Constantinos Karamanlis Institute for Democracy.