OECD urges Greece to remedy social crisis with reforms | Business| Economy and finance news from a German perspective | DW | 10.03.2016
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OECD urges Greece to remedy social crisis with reforms

The Organization for Economic Cooperation and Development (OECD) has called on Greece to implement crucial reforms in its effort to improve stability and recover from a profound social and economic crisis.

In its Economic Survey of Greece released on Thursday, the OECD said tackling poverty and inequality must become urgent policy priorities as the effects of the country's crisis had severely hit one third of the population.

The OECD, which comprises 34 advanced industrialized nations, sees Greece's struggling economy improving in 2017, but added that "major risks remain" for recovery.

"Not only could the credit crunch continue to undermine domestic demand but weak activity could be compounded by a slowdown in global trade and softer growth in the rest of the euro area, the destination of a third of Greek exports," the OECD survey said.

Presenting the report in Athens, OECD Secretary-General Angel Gurria said Greece must address challenging economic and social circumstances.

"Reforms are starting to bear fruit, it is now essential to improve implementation, and focus efforts on both social wellbeing and competitiveness," Gurria said.

Speedier reforms

The OECD report says the structural adjustment process in Greece has so far depended too heavily on fiscal measures and labor markets while not enough progress has been made on product market reforms. Product market reforms have advanced only slowly, and have been undermined by weak implementation and largely left monopoly power in place.

Moreover, tax evasion remains widespread in Greece, thus reducing revenues needed to support social policies. The OECD calls for a broadening of the tax base while the tax administration should be strengthened and given more autonomy.

Reaching an agreement with creditors on significantly extending maturities and repayment grace periods could assure low and stable gross financing needs over the long-term and reduce uncertainty, the survey says.

Programs for the poor

The OECD noted positively that Athens was aiming to introduce a targeted guaranteed minimum income scheme for poor households by 2017, but added that "further action is needed to tackle increasing rates of child poverty."

It recommended the introduction of subsidized school meals and a government-funded social housing program.

Financing such social programs would represent around 1.5 percent of the country's gross domestic product (GDP), which should be garnered from reallocating savings elsewhere, notably in the pensions system, defense expenditure or by improving tax collection.

The Survey adds that the refugee crisis could pose major problems for the Greek economy, particularly if the EU contribution turns out to be insufficient. According to OECD estimates the current influx of refugees could cost the country around 0.4 percent of GDP in 2015.

uhe/hch (dpa, Reuters, OECD)

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