By Nektaria Stamouli, The Wall Street Journal
ATHENS–Greece is on track to meet its budget targets this year and next but may have to make further cuts in 2015 and 2016, the European Commission said in a report that will provide the basis for a decision Monday on whether to release more bailout loans for the country.
The report sums up the findings of the three institutions overseeing Greece's bailout–the Commission, the International Monetary Fund and the European Central Bank–which sent a team of auditors to Athens earlier this spring to review the country's finances.
According to a May 7 draft of the document, seen by the Wall Street Journal, the country's economic prospects remain for the most part unchanged, and the government is expected to achieve its debt reduction targets in 2013 and 2014.
It is the first time in Greece's three-year-old aid program that the country is deemed to have met its goals. In past years, a deeper-than-expected recession and government missteps led Greece to miss its targets.
The draft notes that the Greek government has followed through on most of the austerity measures it promised for 2013 and 2014–also in sharp contrast with previous assessments of Athens' efforts to ease its crushing debt load.
"The very large and highly front-loaded package of fiscal consolidation measures for 2013 and 2014–totalling over 6.5% of gross domestic product–agreed in the previous review has been largely implemented," the report says.
Beyond 2014, the outlook is uncertain and depends "on the strength of the recovery and improvement in taxpayer capability to service their tax obligations," the commission says. It estimates the country's budget gap at around 1.8% and 2.2% of GDP in 2015 and 2016 respectively.
Based on this report, euro zone finance minister are expected to unlock more loans Monday from the country's EUR173 billion bailout. They may even go ahead and release the June installment.
In return for the aid, the EU and the IMF insist Greece must bring its budget deficit below 1% of GDP from more than 15% in 2009. Late last year, they gave Athens two more years to meet that goal–by 2016 instead of by 2014. The budget cuts for the last two years have yet to be spelled out.
The government has promised there will be no more belt-tightening. The country is in its sixth year of a deep recession made worse by waves of austerity.
Unemployment, already over 27%, is expected to continue rising.
