27 March 2012

Olli Rehn: The second programme of economic adjustment for Greece - Greek commitment, European solidarity

At the ECON-EMPL Joint Hearing on Greece, Olli Rehn, EC Vice-President and member of the Commission responsible for Economic and Monetary Affairs and the euro, said ultimately it is the Greeks themselves who need to take the action to reform their country and carry the responsibility for it.

The crisis in Greece is a challenge for the Greek society and for the EU. It is the legacy of years of irresponsible policies. Thanks to European solidarity, we avoided the worst, a social disaster. But the situation remains difficult, especially for the most vulnerable in the society.

The work of the Troika focuses on assisting Greece in rebalancing and restructuring its economy and in improving medium-term opportunities for employment and growth. Let me stress these words: employment and growth. These are the principal objectives of the economic reform programme of Greece. Following the huge imbalances, the necessary adjustment will take time. Yet, we should not have illusions about the fact that there will be neither growth nor new jobs without a correction of the economic imbalances.

The unprecedented financial solidarity provided to Greece proves that there is a strong political commitment by the governments and the national parliaments of the euro area to give Greece the time and the means to repair the damage and heal its economic problems. And it is not correct or fair to put blame for the problems Greece is facing on those who have come to help after the damage was done.

We must recognise the progress Greece is making. The Commission has publicly acknowledged that Greece has made major fiscal adjustments under exceptionally difficult circumstances.

It was in the recognition of these efforts why the Troika kept supporting Greece even though the fiscal targets for 2010 and 2011 were not fully met. It was also in recognition of these efforts that the EAMS decided to increase and extend in time the financial support to Greece.

Challenges remain. The current pace of reform and adjustment are far from sufficient to make Greece's public finances sustainable or to close the competitiveness gap. Further efforts are therefore necessary.

The Task Force for Greece is a resource provided by the Commission, put at the disposal of the Greek authorities, as they seek to build a modern and prosperous Greece. It channels technical assistance from the member states' administrations to assist Greece to design and implement reforms needed for a healthy recovery. Our aim is that, as a result, the Greek citizens will enjoy better public services, a fairer taxation system and a better environment for business and investment.

The programme aims at social fairness. The cuts in pensions have been targeted at highest pensions, while protecting the lowest pensions. The reduction in rents in the healthcare system is designed to maximise benefits for the ordinary citizen. The tax system has been made more progressive. And more importantly, the fight against tax evasion is critical for the programme – not only because of additional fiscal revenues, but also for the sake of social fairness and acceptability of the programme.

Greece has committed to the implementation of its economic reform programme, and it should be given the opportunity to implement it.

The first programme for Greece teaches us an important lesson. It had two Achilles' heels. One was the weak administrative capacity of the Greek administration, which did not allow reforms to be pursued with sufficient vigour. Second was the lack of necessary political unity, which is required to mobilise sufficient support for the demanding reforms.

For the second programme, we are mobilising all the assistance we can to support the Greek administration in strengthening its administrative capacity. But the second Achilles heel, the lack of political unity, while improved recently, can only be healed by the Greek citizens themselves.

One final word on the ownership of the programme. It is a programme of economic reform for Greece – and it is a programme owned by Greece. The troika has helped in its design, and it has been tasked by the creditors, i.e. EA and IMF members, to monitor its implementation, on behalf of those who finance the Greek state by loans of vast magnitude.

In other words, the EU-IMF Troika can facilitate, enable and support – but in the end of the day, it is the Greeks themselves who need to take the action to reform their country and carry the responsibility for it.

Full speech

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