What has Greece accomplished in the frame of its Economic Adjustment Program up to 2014?


THE ECONOMIC ACHIEVEMENTS OF GREECE SINCE THE INITIATION OF THE IMF-EU LENDING PROGRAM ON MAY 2010 (e.g. the biggest and fastest fiscal consolidation in the EU according to OECD data on slide 15 below, and the significant "Primary Surplus" far beyond the "zero-Deficit" agreement term and the negative estimates) 
AND THE AUSTERITY POLICY (Dramatic decrease of all wages and pensions, job cuts, increased income tax, new taxes)





"We are the champions of fiscal consolidation." -Greek FM Yanis Varoufakis #GreekEconomy pic.twitter.com/AOFjsTLJZe

(Referring to data that have been obtained in 2014)




As evaluated until March 2014 by the IMF

Fifth Review of Greece by the IMF

Developments. Significant progress has been made toward rebalancing the economy. The fiscal primary and external current account balances are in surplus. Investor sentiment has improved, and the government successfully placed a medium-term bond. The economy is poised to grow in 2014, after six years of deep recession. All this bodes well for a potentially virtuous cycle of recovery to take hold. But a number of challenges remain to be overcome (...)

Policies. The authorities over-performed significantly on their 2013 fiscal primary balance target, achieving a surplus of 0.8 percent of GDP. (...)

As evaluated until March 2014 by the European Comission

The Second Economic Adjustment Programme for Greece - Fourth Review


Analysis by a Greek Economic Think Tank, "The Crisis Observatory

Link "Objectives": The Crisis Observatory is an initiative of the Hellenic Foundation for European and Foreign Policy (ELIAMEP), with the support of the "Stavros Niarchos" Foundation. ELIAMEP is an independent, non-profit and policy-oriented research and training institute.
Selected slides and transcript for a most comprehensive presentation on understanding the Greek crisis available at  this link (in greek at this link). Published on October 2014. 
Slide 10Borrowing Cost
In the wake of the global financial crisis, markets begin to value the risks for the economies of individual Eurozone member-states differently. Thus, the borrowing cost, which declined after the adoption of the Euro, soared in early 2010. Chart: Greek government bond spreads (10 year) 
Slide 12.  Borrowing upon conditionality
The inability of Greece to tap the international financial markets forced the country to seek borrowing from its European partners and the IMF.
Loans are subject to conditionality. The Greek government signs a Memorandum of Understanding, which details the specific fiscal, financial and structural policies to be implemented, under the supervision of three international organisations:– European Commission– European Central Bank– International Monetary Fund.
1st Programme: 2010 May (2010-2013) (Note: In 2011 it was decided that a second program would be necessary)
2nd Programme : 2012 March (2012-2016) 
Loan: €245 billion
- € 198 billion by member-states of the Eurozone
- €47 billion by the IMF 
Note: EU finding was to stop on December 2014. IMF would continue until March 2016.
At the end of 2014 the Greek governement requested to disengage from the IMF program, i.e. not to receive the remaining funds (which would be subject to further conditions). As the final report was pending and elections had to be held an extension of two months was requested to hold elections. Upon the election of the new governement and the submission of the preliminary reforms a four month extension was granted.
Interest Rate: 3% (IMF) – 2% (Eurozone – after reduction)
–Lower than the country borrows from the markets
–Lower than the rate at which some member-states borrow in order to lend us
Slide 13Austerity Measures are Adopted 
Austerity measures as a percentage of GDP: Break-down of adopted measures between cuts in public spending and increases of government revenues. 
• Wage reductions
• Pension reductions
• Reduction of total number of civil servants
• Cuts on other expenditures of the public sector 
• Decrease of tax-free thresholds
• Increase of VAT rates
• Increase of excise duties
• Solidarity levy
• Real-estate property taxation 
Slide 14Fiscal deficits are being reduced 
During the period 2009-2013:
• The general government deficit is reduced by 13.4 p.p. of GDP
• The primary general government deficit was reduced by 10.8 p.p. of GDP, over-performing the Programme target for 2013 by 0.8 p.p. of GDP.
Slide 15. (Greek version corrigendum*) 2009-2013: The largest and fastest fiscal adjustment in the last 35 years 
Biggest Fiscal Consolidation: Highest scores of cyclically adjusted primary balance improvement (% GDP) 
Fastest Fiscal Consolidation: Highest rate of average annual cyclically adjusted primary balance improvement (% GDP per year) 
Note: The cases of fiscal adjustment have been defined along the criteria set by the OECD (OECD Economic Outlook 81, May 2007) 
* corrigendum for list of countries for chart on the right: Greece, Danemark, Belgium, Germany, UK, Finland, Sweden, Portugal, Irland, Spain, Austria, Italy, Netherlands, France
Slide 16.  The Greek economy undergoes a period of recession and high unemployment 
2013 was the sixth consecutive year of recession with a cumulative decline of the GDP by 25% until today. The Greek economy is expected to return to positive growth rates in 2014.
Unemployment has tripled, reaching its peak in 2013 (the labour market adjusts with a lag to the reduction of the GDP). 
Slide 17.  Labour costs and price developments: The prices of domestically produced goods and services are decreasing at a lower rate relative to wages. As a result, real incomes are further hurt. 
Slide 18.  Price developments
Inflation in Greece was persistently higher than the Eurozone average until July 2011.
Deflation started in March 2013, boosting real incomes but negatively impacting the debt to GDP ratio.
2014 is expected to be the last year of deflation. 
Slide 19.  Banking Sector 
60 billion EUR reduction of deposits in Greek banks, during the period 2010-2012 
Austerity policies, political instability and fear of possible Grexit lead to the outflow of deposits, thus further reducing the ability of banks to provide credit to the real economy.Return of deposits after the double elections of summer.
Slide 20Greece implements structural reforms 
Responsiveness to Going for Growth recommendations across OECD countries, 2011-2012 Responsiveness rate and Responsiveness rate adjusted for the difficulty to undertake reform 
Slide 21Structural reforms in implementing the Memoranda of Understanding
• Fiscal Consolidation: Medium-term programme, expenditure ceilings for ministries, balanced budgets in local authorities and sanction mechanisms, sanction mechanisms for state-owned enterprises in cases of infringement.
• Pension Schemes: Increase of retirement age, pensions are linked to lifetime contributions, streamlining rules for severance payments, revision of list of hazardous occupations and disability criteria.
• Health: Integration of insurance funds, electronic prescribing of medication, increased use of generic drugs, claw-back mechanism.
• Labour Market: Measures to facilitate flexible forms of work, reduction of businesses’ reporting to the Labour Inspectorate, facilitation of firm-level contracts providing for wages below sectoral agreements, abolition of automatic extension of sectoral collective agreements and reduction of after-effects.
• Combating Tax-Evasion: Compulsory electronic submission of income tax declarations, new information systems interlinking tax offices, compulsory rotation of directors of tax offices, semi-autonomous general secretary for public revenues.
• Business Environment: Repeal of 30 major barriers to entrepreneurship, simplification of procedures enabling business start-ups in one day.
• Public Administration reforms: public sector employment cut from over 950.000 in 2009, to less than 750.000 in 2012 and projected to fall by a further 90.000 (13%) by 2016; introduction of unified wage grid and staffing plans for the entire public sector with evaluation of all employees; establishment of mobility scheme and mandatory exit targets; e-government.
• Regulated professions: 74% of restrictions have been abolished in 27 most important occupations/ economic activities. 
Slide 22Recovering cost competitiveness 
2009-2013: Full recovery of cost competitiveness lost during the previous decade. 
Slide 23. Nevertheless, there is still room for price competitiveness 
Although wage costs are declining, prices are affected by tax hikes, high cost of capital and remaining rigidities.
Slide 24.Reduction of External Deficits
Current account surplus for first time in many decades.
The reduction of interest payments due to the PSI, combined with the buy-back of debt, have significantly reduced the external deficit. 
Slide 25.  Sustainability of external deficit 
The drop in external deficit is largely attributable to the reduction of imports, due to: (i) reduced investments, (ii) reduced consumption
In order to a sustainably reduce external deficit, notable changes are necessary: (i)increase of exports, (ii) substitution of imports with domestically produced products, (iii) change of consumption pattern(s) 
Slide 26Debt impairment
Participation of private sector resulted in reduction of public debt by 107 billion EUR via bond swapping (PSI).
Repurchasing of “new” Greek bonds (buy-back) reduced debt by 20 billion EUR.
Slide 27.  Interest payments
Interest payments dropped significantly following the PSI and debt buy-back. 
·Greek banks were affected and needed help by the Greek government to recapitalise.
·Pension funds holding Greek government bonds were affected.
·Low debt servicing costs for the next 8 years (approx. €6 bn. annually or 3 p.p. of GDP vs 4.6% on average for EA periphery peers) 
Slide 28.  Public debt declines
Greek public debt will start decreasing as a percentage of GDP from 2014 onwards, according to official projections. 
Unique characteristics of the Greek public debt: Long average maturity (17 years), low average interest rate (2%), 65% of central government debt owned by the EU official sector. 
Slide 29.  Human capital 
Greece has well educated human capital -especially at the upper end- at competitive rates.
More than 63% of young Greeks aged 15-24 years participate in education. 
Slide 30.  Foreign direct investment 
FDI will alleviate the tight liquidity constraints and support growth of the Greek economy 
Hewlett Packard – Central European distribution centre (3/2013) 
Phillips Morris – European distribution centre (8/2013) 
Coca Cola – Consumer interaction centre (11/2013) 
Nokia – Research and development centre (11/2013)
Slide 33. Annex. Performance in 2013 better than expected:
• -3.9% GDP growth compared to expected -4.2%;
• 0.7% GDP surplus in the Current Account compared to an expected -0.8%;
• Unemployment rate has been declining over the last three months of the year, after more than three years of constant increases;
• General Government balance -3.2% of GDP compared to a target of -4.1%;
• General Government primary surplus 0.8% of GDP compared to a target of 0%;
• 10-year bond yields declined by 298 bps in 2013;
• €6 bn. of public sector expenditure and tax refund arrears to private enterprises and households cleared. 
Slide 34. Annex. Performance in 2014 is also promising:
• -0.3% GDP growth in Q2 2014 compared to -4.0% in Q2 2013;
• € 567 million Current Account surplus in Jan-July 2014, compared to € 398 mn. in Jan-July 2013;
• Unemployment rate remains on a decreasing path (2.4 p.p. cumulative decline since peak);
• GG deficit -0.8 bn Euros in Jan-July 2014, compared to -2.7 bn Eurosin Jan-July 2013;
• GG primary surplus € 3.2 bn in Jan-July 2014, compared to € 1.7 bn in Jan-July 2013;
• 10-year bond yields declined further by 255 bps;
• In April, i.e. four years after having no access to the international capital markets, the Greek sovereign raised €3 billion at a coupon rate of 4.75%, through the sale of 5-year bonds that was almost seven times oversubscribed;
• Further issuance of €1.5 bn in 3-yr paper in July (3.38% coupon), plus another €1.7 bn (5-yr and 3-yr) in exchange for T-bills in September;
• In Q1 2014, the four systemic banks raised additional capital worth € 8.5 bn., comfortably in excess of the needs identified by the supervisor (€ 6.4 bn.), whereas two of them have issued medium-term bonds for the first time since 2009, in order to boost their liquidity.
(note: the transcript was derived after curation of the automatically generated one that is available with the presentation)