The Greek government must respect the reform targets, including pension cuts, tax hikes and budget surpluses, that it promised its creditors following its exit Monday from its €86 billion bailout program.
That was the heavy dose of reality that the European Commission’s chief for economic policy, Pierre Moscovici, delivered during a somber press conference on Monday to mark the occasion.
The end of Greece’s third — and what everyone insists is the last — bailout takes effect after midnight, ending an eight-year crisis that devastated the country’s economy and threatened to tear apart the eurozone.
But the Greek government still needs to introduce certain pre-legislated pension cuts and tax hikes over the next two years. It will also have to maintain a budget surplus target of 3.5 percent of economic output for the next five years. After that, Greece will have to keep a budget surplus of 2.2 percent until 2060.
“Commitments have to be respected,” Moscovici said when asked whether there was any chance of alleviating the looming pension cuts and tax hikes over the next two years.
Athens will also remain under close surveillance of officials from the EU and the International Monetary Fund, starting in early September, to make sure that the government sticks to the pre-agreed reform and austerity measures.
“This [surveillance] framework will support the delivery of our reforms,” Moscovici said. It is necessary “because Greece’s crisis has been so much longer and harder than any other.”
The Greeks borrowed some €250 billion from their eurozone peers over eight years and also owe the IMF around €30 billion.
Monday’s declarations were just a formality after Greece agreed to a post-program deal with its creditors in June. It handed Athens a final disbursement of €15 billion in bailout cash and some debt relief by extending loan maturities from 2023 by 10 years.