Greece needs two decades of austerity to get back on track, says OECD report

Greece’s ambitious program to tackle its economic crisis can succeed in rebuilding growth, jobs and living standards if the reforms are fully implemented, according to a new OECD report.

Presenting the Economic Survey of Greece in Athens today, OECD Secretary-General Angel Gurría praised the difficult decisions already taken by the Greek authorities. “Reforms carried out over the past year are impressive. This achievement does not always seem to be properly appreciated in Greece or abroad. With improved competitiveness, we are seeing the first signs that the much needed macro-economic adjustment is gradually taking place.”
Success will depend crucially on strong reforms and thorough implementation. “Just as important is that the burden and benefits of reform are, and are seen to be, broadly and fairly shared,” Mr. Gurría said. The government faces the twin challenges of proving to financial markets its determination to bring down public debt, and of convincing the Greek people that the pain being experienced now is a necessary step towards a stronger economic future.
The report underlines the need to continue to cut the deficit and then reverse the rise in public debt. Strengthening tax collection is urgent. More transparency should be introduced into the tax system, revenue collection should be measured more effectively and a tough line needs to be taken against tax evasion and vested interests
Boosting privatisation and improving the management of public assets is an important way of reducing debt and debt-servicing costs. It can also potentially stimulate growth through greater efficiency and by attracting foreign investment.
The report also recommends reinforcing the reform of labour and product markets to enhance competitiveness and raise incomes. By contributing to higher growth, a more competitive business environment will also help cut the public debt. The OECD shows that growth can also come from exports and investment, supported by fundamental reforms to address public sector weaknesses, by privatisations and by the new package of EU structural funds. Taken together, such reforms could reduce public debt to below 60 % of GDP over the next two decades from 140% in 2010.
Improved monitoring of the progress of reforms is also key. Policy-makers need high quality economic data, accurate information on the way the measures are being implemented, and on their impact. This should help convince the public and the markets alike that the reforms are working.
The agreement by European Union leaders on 21 July 2011 has given the country more time to carry out the fundamental improvements needed to strengthen the economy and restore confidence in the years ahead, says the report.


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