Greece may fall into an economic trap by continuing to narrow its budget deficit and reduce domestic prices without winning extra debt relief, said Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development.
“In the macro numbers, Greece is delivering,” Gurria told reporters today in Athens while presenting an OECD survey of Greece. “The option, of course, is to look at the existing debt and to say: ‘is this consistent with a return to growth, even in the presence of successful policy transformations?’ And what we are saying here is: ‘Let’s take a hard, realistic view’ and ask ourselves whether it is sustainable.”
Greece, which since early 2010 has received 240 billion euros ($326 billion) in international-aid pledges and undergone the biggest writedown of privately held debt, aims to cut its debt load to 124 percent of gross domestic product in 2020 from a peak of about 175 percent.
The Greek government expects a budget surplus excluding interest payments in 2013, a year ahead of schedule. The Greek fiscal position is significant because euro-area finance ministers agreed in November 2012 to “consider further measures and assistance” once Greece achieves the surplus before interest costs -- known as a primary surplus.
The government in Athens predicts economic expansion in 2014 for the first time since 2007. The Paris-based OECD projects the Greek economy will contract 0.4 percent next year.
“If negative inflation risks materialize, assistance from Greece’s euro-area partners may need to be considered, provided the program has been fully implemented,” the OECD said in its report today.
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