Greece must stick to painful reforms that are yielding results to make its economy competitive and help it exit its economic crisis, the head of the German central bank told Sunday’s Kathimerini newspaper.
Greece is in the midst of talks with chief inspectors from the European Union, European Central Bank and International Monetary Fund who are conducting a bailout performance review before the remaining funding is released.
The review has been interrupted twice since September due to the reluctance of Greece’s fragile, austerity-weary coalition government to adopt any more unpopular measures to satisfy its lenders.
Successive governments have imposed higher taxes, wage cuts and redundancies in the public sector and cuts to pensions, leaving an economy that has shrunk by a quarter after a six-year depression, with more than one in four Greeks unemployed.
“Greece is going through fundamental changes with huge pain for its people. But the pursued policy is already showing signs the macroeconomic situation is improving,” Bundesbank chief Jens Weidmann told the paper in an interview.
Weidmann, also a European Central Bank Governing Council member, said a primary budget surplus, excluding debt servicing costs, had become visible and the country’s current account deficit has shrunk significantly as Greece tries to make sure the budget stays in the black to pay down its debt.
“These first successes must be seen as an encouragement for the government to persist with the same policy, given that all of the agreed adjustment measures have not yet been applied,” he was quoted as saying.
Weidmann told the paper foreign demand would be the main source of growth for Greece’s economy, citing Germany’s example.
He said Germany’s high current account surplus compared with its euro zone partners had come down by almost half between 2009 to 2012 and that its strong exports were helping the bloc.
“Given the value chains of German industry, the rest of Europe also benefits from its strong exports activity to the U.S. and China,” he told the paper.
Souce: Reuters Reporting by George Georgiopoulos; Editing by Alison Williams