Greece’s international creditors see “significant risks” that it might need yet more rescue loans because it will fail to control its massive debt.
They are worried that its programme of austerity measures and structural reforms “could be accident prone.”
“Authorities may not be able to implement reforms at the pace envisioned,” said the report by the International Monetary Fund, the European Commission and the European Central Bank.
The Greek programme expects to lower debt to 116.5% of GDP by 2020. The minimum target set by the bailout creditors is 120.5% by 2020.
On top of concerns that reforms are too slow, the Greek economy faces a grim outlook. It is in its fifth year of recession and would need to recover before debt reduction plans can have much effect.
Overall, the bailout creditors’ report sees a risk that the programme would bring debt down to only 145.5% of GDP by 2020, even after taking into account losses accepted by private creditors.
“Stress tests point to a number of sensitivities, with the balance of risks mostly tilted to the downside,” said the report dated March, 11.
“Greater wage flexibility may in practice be resisted by economic agents; product and service market liberalisation may continue to be plagued by strong opposition from vested interests; and business environment reforms may also remain bogged down in bureaucratic delays,” it reads.
Moreover, Greece is heading toward a general election in late April or early May, likely causing further delays to reforms. A new government might take also seek to change the terms of the bailout program.
“On the policy side, it may take Greece much more time than assumed to identify and implement the necessary structural fiscal reforms,” the document says. Revenue from selling state assets my also fall behind expectations “due to market-related constraints, encumbrances on assets, or political hurdles,” it notes.