OECD cautious on Greek short-term prospects
Published 03/08/2011 | 05:00
THE Organisation for Economic Co-operation and Development (OECD) has given a cautious welcome to the new Greek bailout, but warns that it will take a generation to get the country's debt back down to a manageable level.
In a report published last night, the OECD said the ambitious programme agreed under the bailout could succeed in rebuilding growth, jobs and living standards, if fully implemented.
"If Greece succeeds in implementing ambitious reforms, public debt will fall below 60pc of GDP over the next two decades," it said.
The report said the new EU/IMF bailout would give Greece the time needed to make "fundamental fiscal and structural reforms, and for those reforms to bear fruit".
The OECD predicts that Greek debt will not fall to 100pc of GDP until 2035 -- that's under a "baseline" scenario where Greece misses target to raise €50bn from privatisations by 2015.
Greek government debt is 140pc of GDP and rising.
Under a more optimistic scenario, debt could shrink to 60pc of GDP by 2035, the report said. That will happen if Greece meets, or is close to meeting, the privatisation targets set out in the new bailout.
The OECD said the planned privatisations would help cut debt and could help improve efficiency in the Greek economy.
It also welcomed what it said had been substantial progress on reforms to date, but criticised the Greek government for failures to bring in a higher share of taxes and for failing to open up closed professions and liberalise the jobs market.
"Despite the impressive record on structural reform, the government has backtracked on reforms related to wage agreements, opening up of the professions of lawyers and pharmacists, and has hesitated on the privatisation programme," the report says.
The OECD also suggests selling Greek banks to bigger international rivals in order to wean them off their dependence on the European Central Bank for liquidity.