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EU to end scrutiny of Greek economy after 12 years of turmoil

The European Commission will end its tightened controls on the Greek economy, ending a debt crisis triggered by the global financial turmoil of 2008 that nearly pushed the country out of the eurozone.

In a letter to Greece’s Finance Minister Christos Staikouras on Wednesday, EU Economy Commissioner Paolo Gentiloni said Greece “has fulfilled most of the policy commitments” made to the Eurogroup of 19 eurozone member states and “a effective reform implementation”, despite the impact of Covid-19 and the war in Ukraine.

Staikouras said on Twitter that the announcement “marks the achievement of an important national goal for Greece”.

After the 2008 financial crash, Greece was plunged into a debt crisis that led to bailouts by the EU and the IMF in 2010. Over the next decade, the country’s economy shrank by a quarter and the disposable income of Greek citizens fell by a third on the back of austerity policies imposed by the so-called “Troika” of institutions including the commission, the IMF and the European Central Bank.

Thousands of young Greeks left the country in search of work as unemployment in the country peaked at 27.8 percent in 2013, while the government was forced to make drastic cuts in the pension system and the civil service in return for financial aid.

The commission, which oversees the budgets of all 27 member states, has overseen reforms of the Greek economy since the start of the bailout program.

The tough terms of the bailout, largely dictated by Germany, nearly pushed Greece out of the eurozone in 2015 when then Prime Minister Alexis Tsipras imposed the conditions on the Greek people in a referendum. Voters rejected the aid package’s terms, but Tsipras pushed through the reforms anyway.

The announcement of the end of the strict control program comes as the ECB puts in place mechanisms to prevent a second collapse of the eurozone economy.

Last month, the ECB raised interest rates for the first time since 2011, and has focused the reinvestment of maturing bonds on southern EU countries, including Greece.

Following EU officials’ most recent trip to Athens in April, the commission noted that economic growth is expected to reach 3.5 percent in 2022 and 3.1 percent in 2023, despite ongoing uncertainty over the pandemic and rising energy costs.

It also said there was a “positive surprise” in the government’s primary deficit — the difference between government revenues and expenditures excluding interest payments — which was 5.5 percent of gross domestic product in 2021, 2.1 percentage points less than expected.

The so-called “economic adjustment program” ended in June 2018, but Brussels has kept Greek finances under surveillance ever since.

The commission said in a statement that the risk of “spillovers to the eurozone economy has decreased significantly” and that more detailed monitoring “is no longer warranted”.

A final installment of debt relief is due in November if Greece meets the terms of a “post-programme surveillance” report.

In a letter to Gentiloni, Staikouras said Greece had implemented reforms in six key areas — fiscal policy, social welfare, financial stability, labor markets, privatization and public administration — that had “created a solid platform for Greece to achieve sustainable and inclusive long-term growth.” ”.

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