World Economy

Greece Growth Could Return in 2016

Greece Growth Could Return in 2016Greece Growth Could Return in 2016

Greece’s economy could start growing again in the second half of 2016, but much work remains to be done on reforms required for bailout loans, the European Union’s top economic and financial official said Wednesday.

Pierre Moscovici said compromise was possible on how to tackle the problem of distressed mortgages but that decisions need to be taken quickly if Greece is to receive funds from its new €86 billion, three-year bailout. Pension reforms will also need to be made this month, CTV News quoted him as saying.

A raft of spending cuts and tax hikes have already been passed in parliament. “We are impressed by the reforms voted on after August but we must keep the momentum,” Moscovici said.

Greece has promised to implement a series of reforms, including tax hikes, spending cuts and pension reforms, in return for the bailout, without which it would default on its debts and likely end up having to leave Europe’s joint currency, the euro.

Despite initially pledging to repeal bailout commitments when he first came to power in January, Prime Minister Alexis Tsipras has since made a U-turn and agreed to implement the measures.

However, he said Wednesday that Greece should be given some lee-way as it is bearing the brunt of a massive refugee crisis, with hundreds of thousands of people streaming into the country from nearby Turkey.

“We are a country that has taken on a responsibility that is beyond its means,” Tsipras said after a meeting in Athens with European President Martin Schulz focusing on the refugee issue.

More than 600,000 people have reached Greece so far this year, and hundreds have died attempting to make the short but dangerous crossing to Greek islands from the nearby Turkish shore. The vast majority don’t want to stay in Greece and head north to more prosperous European countries.

Tsipras said the financial crisis had created “a humanitarian crisis domestically” and his government wanted European creditors to show “the same solidarity that we are showing to the refugees.”

He indicated the creditors should ease demands on resolving distressed Greek mortgages, so as to not have too many people evicted from their main homes. Part of bailout conditions was to end consumer tax breaks for Aegean islands and to allow the repossession of homes from non-performing loans.

“While our islanders are opening their doors to the refugees, sharing their food and sometimes even the roof over their heads–at the same time the government is obliged to increase (consumer tax) to the islands,” he said. “While we do our best to shelter refugees, we are facing irrational pressure to stop protecting primary homes for Greek citizens.”

But Moscovici poured cold water on the idea. The bailout rules must be implemented and “nothing must lead to relaxing the reforms,” he said.