Greece ‘should return to growth in 2014’, troika says

Finance minister will seek further debt relief if fiscal targets are met

Deputy director of the IMF's European Department and mission chief for Greece Poul Thomsen attending a  meeting in Athens today, where  Greece announced it would  seek a drastic debt cut from its euro zone partners if it manages to beat its fiscal targets for this year. Photograph: John Kolesidis/Reuters

Deputy director of the IMF's European Department and mission chief for Greece Poul Thomsen attending a meeting in Athens today, where Greece announced it would seek a drastic debt cut from its euro zone partners if it manages to beat its fiscal targets for this year. Photograph: John Kolesidis/Reuters

 

Greece is on course to contain its debt and keep the level sustainable and should return to growth in 2014, its international creditors said today, adding that the next disbursement of aid to the country should be approved soon.

The European Commission, International Monetary Fund and European Central Bank, together known as the troika, said Greek authorities were on track to meet economic targets soon, which would allow for the next payment of financial support.

"The disbursement of the related €2.8 billion from the EFSF tranche remaining from the previous review could be agreed soon by the euro area member states," they said in a statement after the latest review of the country's performance.

"Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-2014 that are not yet in place."

One of the most important steps Greece needs to take is the recapitalization of its banking sector so that banks can start lending to the real economy again. The troika said the process of recapitalization was nearly complete, with most of the €50 billion made available disbursed to four core banks.

"The mission's assessment is that this will provide adequate capital, even under a significantly adverse scenario. These capital buffers will thus ensure the safety and soundness of the banking system and of its deposits," the troika said.

Greece's finance minister, Yannis Stournaras, said the country aimed to achieve a primary budget surplus (the surplus before taking into account debt financing costs) this year. If that was achieved, he said Greece would seek more debt relief.

The troika has told Greece that it could get further debt relief, probably in the shape of lower financing costs, if it meets its fiscal targets, including a primary budget surplus.

The critical long-term goal for Athens is to bring its debt as a proportion of GDP down to a manageable size. The ratio currently stands at more than 160 percent. The IMF has said it must be cut to 120 percent by 2020 to be "sustainable".

In its review, the troika hit a positive note on the debt path and said that it was prepared to consider "further initiatives and assistance" to help bring the debt down more rapidly once Greece has achieved a primary surplus.

"The mission's view is that debt sustainability remains on track," it said.

Euro zone finance ministers and the IMF are expected to sign off on the troika review in May.

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