Troika: Greek economy is stable and will develop

“Greek economy is beginning to stabilize and is heading for a gradual return to growth, which is consistent with our previous estimates” was the official announcement of Troika, which was published late Wednesday night and comes in support of the agreement reached between lenders and the government. The international troika of creditors of Greece, the European Commission, the European Central Bank, the International Monetary Fund confirmed the latest assessment of the implementation of the support program of the Greek economy, removing the deadlock in the negotiations of the past six months, a development that is expected to lead to the release of a new installment. According to the Troika, the financial performance of Greece will enable the country to fulfill the objectives that were set, including the recording of a primary surplus equal to 3% of GDP in 2015, while prices “are corrected” and “inflation remains well below the eurozone average”.

“The financial performance is on track to achieve the objectives of the program. The preliminary estimates indicate that the target for the primary surplus in 2013 was achieved by a significant margin. Although only a small part of the positive results will be moved to 2014, we believe that the fiscal targets of 2014 will also be reached; taking into account implemented and planned measures” is added in the text that was published simultaneously in Brussels and Washington. Regarding structural reforms, troika indicated that “the authorities achieve progress to improve the growth potential and flexibility of the Greek economy and help create more equitable and supportive environment conducive to investment, growth and job creation”.

However, troika noted that there is a risk that Greek banks will need a much higher amount to recapitalize then the Greek authorities’ estimate, especially if the problem of non-performing loans isn’t solved. “The authorities are committed to take all necessary measures to ensure that banks remain adequately capitalized and will be able to support the economic recovery” was stressed by the lenders, who add that “upside risks to the estimates capital needs, especially if the authorities and the banks don’t deal rapidly and effectively with the high level of non-performing loans”.

“The Bank of Greece should remain vigilant with regard to supervision by the banking system and strongly demand from banks to quickly convert large stocks of troubled assets” troika believes. Finally reference is made about the release of the next tranche of Greece's loan, which is expected in “the next few weeks” after a formally approval from the Governing Board of the IMF and the Eurogroup, in line with the official announcement.