The European Union’s budget watchdog announced Wednesday that it is winding up years of surveillance of Greek government spending. The move marks a formal end to a major crisis that threatened to see Greece ejected from the euro single currency group, imposed severe hardship on its citizens and roiled global financial markets.
The European Commission, which supervises the budgets of the 27 EU member countries, said it will end its “enhanced surveillance” program on Aug. 20, noting that “Greece has delivered on the bulk of the policy commitments” made to its partners in the 19-country euro area.
Greece was granted billions of euros in three successive bailouts after 2010, when Athens lost access to international bond markets after admitting it had misreported key financial data. Greece’s debt ballooned to about 180% of Gross Domestic Product.
Two of the financial bailouts ultimately failed to improve things enough, although creditors in the euro group demanded — and received — deep economic reforms that hammered citizens with austerity policies, including repeated tax hikes and pension cuts. Poverty and unemployment skyrocketed, and at one point about a quarter of the workforce was jobless.
In 2015, the leftist prime minister at the time, Alexis Tsipras, put his country's membership of the euro area and, ultimately, the EU on the line by calling a referendum on whether Athens should accept the terms imposed on it by creditors, led by Germany. Voters rejected the terms, but the government then proceeded to impose draconian creditor-demanded conditions anyway.
But on Wednesday, the EU commission said that now “as a result of Greece’s efforts, the resilience of the Greek economy has substantially improved and the risks of spill-over effects on the Euro area economy have diminished significantly.”
“Maintaining Greece under enhanced surveillance is no longer justified,” it said.
The Greek financial crisis was a major test for the EU and provided proof, if any were needed, that bailing out a bigger economy, like debt-ridden Italy, would probably exceed the means that even a united Europe can muster.
“With this development, along with the premature repayment of the International Monetary Fund loans and the lifting of capital restrictions, a difficult chapter for our nation ends after 12 years,” Greek Finance Minister Christos Staikouras said in response to a Commission letter confirming the enhanced surveillance would end.
“Greece is returning to European normality and stops being an exception in the eurozone,” Staikouras said. “This achievement is the fruit and the recognition of the great sacrifices of Greek society, of the government’s fiscal policies but also of its broader reforms,” he added.
Staikouras said that ending the enhanced surveillance the economy was under reinforces Greece’s position in international markets, boosts the country’s development and ability to attract investments and grants greater freedom in the management of fiscal policy, within the regulations applying to all EU members.
“Until today, despite unprecedented, multi-level crises and the new — Europe-wide and international — challenges, we have proven, both citizens and the state, that we can do it,” Staikouras said. “We set targets and with a plan, unity, determination, trust in our abilities and hard work, we achieve them.”
Although Greece has returned to international bond markets, its credit rating remains below investment grade, which raises its borrowing costs and precludes many potential investors from buying Greek bonds. The government in Athens says it hopes to regain investment grade by next year.
