Greek bailouts helped only to 'limited extent,' EU auditors say

The billions of euros lent to bail out Greece helped the country recover only to a "limited extent" and did not restore its ability to finance itself on debt markets, the Luxembourg-based European Court of Auditors (ECA) -- overseer of European Union finances -- said on Thursday.

The European Commission, European Central Bank, International Monetary Fund and Luxembourg-headquartered European Stability Mechanism were all involved in arranging three loans -- the first in 2010 -- that totalled €368.6 billion. They were conditional on wide-ranging structural reforms from Greece.

"These programmes promoted reform and avoided default by Greece," Baudilio Tomé Muguruza, who was responsible for the ECA report, said in a statement. "But the country's ability to finance itself fully on the financial markets remains a challenge."

Greece's economy grew as much as 5.8% in 2003, two years after it joined the eurozone, according to World Bank data. The global financial and European debt crises uncovered Greece's vulnerabilities. By April 2010 the country could no longer finance itself on world markets. 

Greece then had to seek financial assistance.  In 2011 its economy contracted 9.1%.

"The programmes' conditions were neither sufficiently prioritised by importance nor embedded in a broader strategy for Greece," the ECA said. "Macro-economic assumptions were poorly justified. Cooperation with other institutions was effective but informal."

The ECA found a "mixed picture" in the design and implementation of Greek reforms in the fields of taxation, public administration, the labour market and the financial sector. The underlying budget balance improved by 17% of gross domestic product from 2009 to 2015, though because economic activity declined, Greece's debt-to-GDP ratio consistently increased, the ECA said.

The ECA has made recommendations to the European Commission about how to improve the design and implementation of any future bailout programmes. They were accepted in full, it said.

Separately, the Commission published a report on the Greek programmes on November 13.

It said major macroeconomic imbalances in Greece have been corrected. Still, underlying structural weaknesses and 'stock' problems such as a high level of bad loans held by banks need "further sustained efforts" to fix.

"Greece needs to build on the massive efforts undertaken so far to establish full policy credibility, underpin confidence and nurture a positive investment climate going forward," the Commission said.

Greece's current bailout programme is scheduled to end in August 2018. The country did tap international debt markets after a three-year break in July with a €3 billion bond sale that reflected its improving economy.

(Alistair Holloway, alistair.holloway@wort.lu, +352 49 93 39)