ATHENS — A senior official from the European Central Bank on Monday urged Greece’s new government to avoid further delays in implementing major structural reforms.
ECB board member Joerg Asmussen is in Athens as the struggling country’s new coalition government holds talks with its rescue creditors. The government is seeking to amend Greece’s bailout program as it battles a fifth year of recession.
Asmussen, who met Finance Minister Yannis Stournaras, said Greece should not “stretch the pain” of reforms any further.
“If one has identified that something needs to be done, do this quickly,” Asmussen told a financial conference in Athens. “Don’t wait. Don’t stretch the pain … because this is better to restore confidence in an economy.”
Greece’s new conservative-led government was formed quickly after June 17 general elections that ended months of political uncertainty, but saw a sharp rise in support for parties opposed to the bailout.
New Prime Minister Antonis Samaras, who is convalescing at home following an eye operation, argues that the terms of bailout agreements that started in 2010 have failed to stimulate growth.
Asmussen, however, said failure to tackle the underlying problems of Greece’s crisis — a lack of economic competitiveness, high debt and a bloated public sector — would only result in more pain.
“The new government should not lose precious time looking to avoid or loosen the program. It should instead focus on how to maximize the effectiveness of reforms,” he said.
“The problems do not go away. Instead markets lose their trust in official statements. Governments have to take even more drastic policy measures to win back credibility.”
Greece narrowly avoided bankruptcy earlier this year, before winning a major debt restructuring deal with banks and additional bailout money from the other eurozone countries and the International Monetary Fund.
In return, Greece slashed the minimum wage as part of ever-harsher austerity measures.
Debt inspectors from the so-called troika — EU, IMF and ECB — are due in Athens this week to meet the new government, that is backed by Samaras’ conservatives, traditional rival Socialists and a small left wing party.
The salary cuts and tax increases that Greece has imposed have sent unemployment spiraling to above 22 per cent,
The new government is facing more public discontent this summer, when a major round of tax hikes takes effect. A raft of tax exemptions will be scrapped and the annual threshold of taxable income will be slashed from C12,000 to C5,000 ($15,100 to $6,300).