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OECD: Greece Must Continue Reforms, Further Austerity Possible
ATHENS -(Dow Jones)- Greece must continue with its efforts to fix its public finances but may be forced to adopt further austerity measures if a hesitant global recovery stalls and begins to weigh on growth, the Organization for Economic Cooperation and Development warned Thursday.
In its latest economic outlook for its 33-member countries, the OECD said Greece was broadly on track with its fiscal program, which aims to cut the deficit to 7.6% of gross domestic product by end-2011 from a revised 15.4% of GDP in 2009.
"A further decline in the deficit to around 6.5% of GDP is assumed in the projection for 2012 in line with the Economic Policy Program. However, in view of lower projected growth by the OECD, this would require additional measures compared to the program," the OECD said.
In May, Greece narrowly avoided default with the help of a EUR110 billion loan from the European Union and International Monetary Fund, in exchange for a series of austerity measures and economic reforms aimed at bringing its budget deficit below an EU cap of 3% of GDP by 2014.
But the OECD also warned that Greece must continue with its austerity program even beyond that time in order to address the country's huge debt burden, projected to peak at 149% of GDP in 2013.
"Lowering the deficit to below 3% [of GDP] by 2014, as set by the program, is essential to correct the unsustainable fiscal imbalances, even if this would require further austerity measures," the OECD said. "Moreover, consolidation efforts need to continue beyond the program horizon to reduce the very high debt burden."
In its report, the organization said Greece's economy would shrink by 2.7% next year before staging a modest recovery in 2012 with a 0.5% growth rate. Unemployment is seen rising to 14.5% next year and 15.2% in 2012, up from a projected 12.2% this year.
"Successful pursuit of the program would minimise the risks to the projected recovery, but it could be slowed by social opposition," the OECD said. "The external environment poses additional uncertainties, especially as regards the growth of main trading partners."
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Le previsioni OCSE.
ATHENS -(Dow Jones)- Greece must continue with its efforts to fix its public finances but may be forced to adopt further austerity measures if a hesitant global recovery stalls and begins to weigh on growth, the Organization for Economic Cooperation and Development warned Thursday.
In its latest economic outlook for its 33-member countries, the OECD said Greece was broadly on track with its fiscal program, which aims to cut the deficit to 7.6% of gross domestic product by end-2011 from a revised 15.4% of GDP in 2009.
"A further decline in the deficit to around 6.5% of GDP is assumed in the projection for 2012 in line with the Economic Policy Program. However, in view of lower projected growth by the OECD, this would require additional measures compared to the program," the OECD said.
In May, Greece narrowly avoided default with the help of a EUR110 billion loan from the European Union and International Monetary Fund, in exchange for a series of austerity measures and economic reforms aimed at bringing its budget deficit below an EU cap of 3% of GDP by 2014.
But the OECD also warned that Greece must continue with its austerity program even beyond that time in order to address the country's huge debt burden, projected to peak at 149% of GDP in 2013.
"Lowering the deficit to below 3% [of GDP] by 2014, as set by the program, is essential to correct the unsustainable fiscal imbalances, even if this would require further austerity measures," the OECD said. "Moreover, consolidation efforts need to continue beyond the program horizon to reduce the very high debt burden."
In its report, the organization said Greece's economy would shrink by 2.7% next year before staging a modest recovery in 2012 with a 0.5% growth rate. Unemployment is seen rising to 14.5% next year and 15.2% in 2012, up from a projected 12.2% this year.
"Successful pursuit of the program would minimise the risks to the projected recovery, but it could be slowed by social opposition," the OECD said. "The external environment poses additional uncertainties, especially as regards the growth of main trading partners."
***
Le previsioni OCSE.