A progress report on the new EU mechanisms set up for “supervision and solidarity” in the post bailout program era, addresses the tight fiscal and regulatory framework in which Greece is asked to deal with its persistent economic and structural problems.
The report which is published by the members of the Budget Office of the Greek Parliament reveals that Greece has not yet overcome its serious financial problems. As a result, new fiscal rules are necessary for the eurozone, based also on the intention of Greece to remain within the euro and not to return to its previous currency, the drachma.
“Every future Greek government, irrelevant of whether a new memorandum will be signed or not, will have to operate within the new regulations of financial and fiscal policies,” mentions the report, while explaining that the Greek public debt of 170% of the GDP will lead sooner or later to higher taxes being implemented, which in turn will curb any growth perspective.
The report argues that the new governmental priorities lead to the GDP rate being dropped and to a dramatic increase in unemployment. In the past years, the GDP drop had an “avalanche effect” by making the implementation of reforms increasingly difficult and unlikely to have permanent results.
Under these circumstances, the Budget Office considers the debt problems of Greece (and of other countries with similar debt problems) to be unresolved. Therefore, Greece won’t be able to reduce its debts without any further assistance, but notes that any additional austerity measures will only worsen the situation.
The report concludes in saying that “every member state should legislate and observe a balanced budget” (the golden rule) and predicts that when Greece publishes its midterm plan for 2014-2016 by late April, it must include measures that will “ensure a fiscal balance after the current bailout program ends, in order to demonstrate the country’s commitment to the European framework.”