The European Stability Mechanism (ESM) published its annual report for the year 2018 on Thursday.
The European Institution praised Greece for its recent efforts strengthen the country financially, noting that 2018 was a landmark year for the country, mostly due to the country’s exit from the Memorandum in August.
The ESM noted the contribution of this vital institution in safeguarding the European economy, stating that ”as a result of ESM and EFSF lending terms, our beneficiary countries saved a total of nearly €18 billion in debt service payments in 2018, compared to the assumed market cost of funding. Greece alone saved €13 billion last year, the equivalent of 7% of the country’s GDP.”
The 132-page report includes extremely detailed presentations of the financial situations in Greece, Cyprus, Spain, Portugal and Ireland, the European member states hardest hit by the financial crisis.
In the Greek section of the report, the ESM highlighted the many steps that the country took from 2015 to 2018 in order to reform its economy, its public finances, its banking sector and other vital elements of its public, economic and social life.
The ESM also noted that Greece had progressed further in clearing its private sector debt, but it also stated that the country needs to ”intensify efforts to further modernize its public financial management system.”
The Stability Mechanism report also referred to the Greek government’s decision not to implement further austerity measures, including pension cuts, free-tax threshold reduction, tax reductions and other steps.
It noted that Greece indeed had the fiscal space to do so, since ”a primary surplus of 4.3% in program terms outperformed the fiscal target of 3.5% of GDP in 2018.”
However, the report expressed the ESM’s concern that these measures might have a negative effect on Greece’s efforts to boost growth.
”For the future, it will be important that Greece combines its post-program commitments with policies and public investments that support the economy’s recovery, strengthen market confidence, and sustain growth,” the ESM cautioned.
Klaus Regling, the managing director of the ESM, noted ”there is a risk that Greece will not achieve its fiscal obligations,” but added that he is counting on the Greek government’s assurances that the targets will be achieved in full.
The ESM is an intergovernmental organization located in the city of Luxembourg, which operates under public international law for all eurozone member states having ratified a special ESM intergovernmental treaty.
Its predecessor, the EFSF, was created by the EU to safeguard the Eurozone’s economy after the worldwide financial crisis of 2008.