If Greece keeps to its reforms path, it will have a good future in the Eurozone, European Stability Mechanism (ESM) managing director Klaus Regling said in an interview to Handelsblatt on Wednesday, adding that he is optimistic about Greece’s post-adjustment-program prospects.
Asked what lessons Greece could learn from other countries completing their own bailout programs, Regling said that Ireland and Spain, which were on adjustment programs also, now have the highest growth rates in Europe after applying reforms rigorously and taking ownership of their budget.
He said that Greece has committed to continuing the reforms, but warned that some of the debt-relief measures could be revoked if reforms stop. The country understands that it will be subjected to a permanent surveillance and evaluation by markets and investors, exactly like other countries in adjustment programs, he pointed out.
Asked why the program lasted much longer in Greece than in other countries, Regling said that no other country faced such huge problems and such weak administration as Greece did. He added that the country was moving in a wrong direction for six months in 2015 under the then-finance minister Yanis Varoufakis, a fact that cost the Greeks billions of euros and lengthened the adjustment process to six instead of three years, as in other countries.
But efforts have been fruitful, he said, as the country is again in the black as of 2016, despite the fact the deficit was over 15 pct of the GDP in 2009.
Greece applied widespread and often painful infrastructural reforms resulting in a drop in real wages but his was necessary, he said, as wages had risen in the past much faster than productivity and the country had lost its competitive edge.