The European Stability Mechanism (ESM) annual report concluded that Greece could no longer put off implementing the necessary reforms provided in the 3rd adjustment program. The report underlines that the country had to swiftly apply all the necessary actions, while it adds that a new period of political uncertainty would adversely affect the Greek economy.

In its six-page chapter on Greece the ESM report points out that a timely and full implementation of the 3rd program is imperative, as it would help the country return to economic growth. ‘The Greek government and its creditors must continue to build a relationship of trust and the Greek government must fully own the program’, the reports says. The reports makes it clear that the steps needed to be taken by Greece include reforming income tax and the pension system, reduce the volume of non-performing loans, as well as the overhaul of the banking system.

In preface note in the report, ESM Director Klaus Regling points out that 2015 was a challenging but successful year for the ESM, with Greece being the greatest challenge. Regling points out that reforms stopped once the new Greek government was elected, as it attempted to seek financing from other avenues, which derailed the program for six months and negatively affected the Greek economy. This set back the positive trend in the country’s public finances causing the need for new harsh austerity measures. Regling underlines that the loan terms offered by the ESM to Greece in 2012 are commensurate with a 40 per cent reduction in the loan.