Reforms Said Greece’s Way Out

ATHENS – Four years of harsh austerity measures, which have done as much damage as good, haven’t done enough to lift Greece toward a recovery, a report by one of the country’s most prominent think tanks said.

The government must find a way to create growth and restore a Gross Domestic Product (GDP) that has fallen by a quarter since international bailouts began in 2010 and came with attached big pay cuts, tax hikes, slashed pensions and worker firings, the Foundation for Economic and Industrial Research (IOBE) said.

During the presentation of the organization’s quarterly report on the Greek economy, IOBE General Director Nikolaos Vettas stated that “for growth to come, it is essential to push structural reforms deeper,” noting that not all the economy’s problems have been solved as “the stabilization of the economy has not yet reached the end of the road.”

The IOBE forecasts that the economy will stabilize this year, with a possible slight increase of GDP. However it warns of the political risk due to next month’s elections:

“The current election cycle is creating uncertainty and has led enterprises and households to wait before making decisions, even though this does not concern [parliamentary] elections,” the report notes, referring to the polls for the European Parliament which come at almost the same time as those for Greek municipalities.

Vettas said while austerity has cut government spending that Greece has to grow its way out of a deep recession, although the government hasn’t been successful in luring significant Foreign Direct Investment.

IOBE recommended structural change in several areas:

  • Creation of broader political and social consensus, which will involve clashes with special interest groups
  • Application of specialized knowledge regarding specific problems
  • Investment in a clear financial policy in general
  • Adetermined approach toward the adoption of reforms.

The foundation’s forecasts for the country’s economy, presented by IOBE Scientific Director Aggelos Tsakanikas, suggest that the first two quarters of the year will show the economy continuing its downslide, while the second two will finally bring the GDP back on a growth course.

Record unemployment of 27.6 should fall slight to 26 percent, while the consumer price index will remain in negative territory, at a rate of 0.6 percent.

Vettas said the country’s new growth model for the decades to come should be built on fiscal stability and reforms.

He said there are sectors where investments can be made in the short term to strengthen the economy, such as tourism, the primary sector, manufacturing, food, energy, waste management, as well as infrastructure and transport.

Prime Minister Antonis Samaras has been imposing reforms on the orders of the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up 240 billion euros ($330.7 billion) in two rescue packages but IOBE said more needs to be done.