Greece: Lower Primary Surpluses After 2018 And Sustainable Debt Relief

Beginning from the first weeks of September and during the next few months, the European Union and Eurozone will have to provide convincing answers to a number of crucial issues vital to the future of the Union. Greece is entering again into the core of the debate, revving up for the second bailout review as well as for a possible, sudden increase in refugee inflows.

 The Context

The initiative of the Greek PM Alexis Tsipras to invite leaders of the European South to Athens (September 9) is part of a broader effort to foster regional strategic alliances against Berlin’s austerity politics, as well as a quest for a new vision for Europe against the populist and xenophobic rhetoric of the conservative and far-right parties. The Greek side aims at invigorating the debate over the topic “what kind of Europe do we want”, enhancing the participation of civil society actors and citizens in the policy- and decision-making process. In this respect, the emphasis must be on the younger generations struggling to escape from the vicious circle of unemployment and recession.

Here, the Greek PM proposed last week a string of policy proposals at the informal summit of socialist leaders in Paris, where he was invited as an observer. The four Tsipras proposals focus on the major topics of our era, such as the need for social and economic convergence with the increase of funds from Juncker’s stimulus plan, the transfer of more funds towards the European periphery suffering from inequality and poverty, the non-inclusion in annual budgets of the deficit created by public spending on the fight against unemployment, and finally the establishment of a joint forum of socialist and leftist political forces in Europe.

At the same time, the Progressive Caucus team in the European Parliament, i.e. a team of MPs on which I participate as a member of the executive committee, is intensifying the pressure for institutionalizing an open debate among MPs coming from progressive and democratic forces, including the Left, the Socialists and the Greens. This multiparty initiative aims at further empowering the role of the European Parliament in the policy-making process and getting more active in reorientating EU policies towards deeper social and economic convergence.

Major Developments For Greece

The Greek government has put a great deal of effort and determination into dragging the country out of the restricted framework of financial control, setting the conditions for a steady return to growth and improvements in social justice mechanisms. The successful conclusion of the first review of the bailout program has given space and time to the government to focus this time on other major fields of policy, such as constitutional reform and the preparation of the ground politically for a new social policy model.

The rapid and successful conclusion of the second review of the bailout program is of paramount importance for the country in its efforts to stand firm on the path of stability and reforms, despite and against the continuous efforts of certain political and media circles in the country and abroad to undermine the progress that has been made.

The European institutions and our partners have to acknowledge that more realistic primary surpluses are needed after 2018, as well as specification of the short- and mid-term measures to contribute towards achieving sustainable debt relief by the end of 2016. Maintaining such high levels of primary surpluses is not considered a viable option neither for the Greek government nor for the institutions. Lowering the target to around 2-2.5 per cent of GDP will allow a more balanced economic policy mix, encourage private investment and contribute to sustainable growth rates.

Addressing both issues and successfully concluding the second bailout review would act as a catalyst for future positive developments as it would enhance economic stability and have strong, positive and lasting impact on the real economy, employment rates, the investment climate and the welfare state.