FRANKFURT (MNI) – The following is the verbatim text of the
statement released by the European Commission, the European Central Bank
and the International Monetary Fund following their fifth Review
Misstion to Greece:

Staff teams from the European Commission (EC), European Central
Bank (ECB), and International Monetary Fund (IMF) have concluded their
fifth review mission to Greece to discuss recent economic developments.
The mission has reached staff-level agreement with the authorities on
the economic and financial policies needed to bring the governments
economic program back on track.

Regarding the outlook, the recession will be deeper than was
anticipated in June and a recovery is now expected only from 2013
onwards. There is no evidence yet of improvement in investor sentiment
and the related increase in investments, in part because the reform
momentum has not gained the critical mass necessary to begin
transforming the investment climate. However, exports are
reboundingalbeit from a low baseand a shift towards a more dynamic
export sector, supported by a moderation of unit labor costs, should
lead to more balanced and sustainable growth over the medium term.
Inflation has come down over the last year and is expected to remain
below the euro area average in the period ahead.

In the fiscal area, the government has achieved a major reduction
in the deficit since the start of the program despite a deep recession.
However, the achievement of the fiscal target for 2011 is no longer
within reach, partly because of a further drop in GDP, but also because
of slippages in the implementation of some of the agreed measures.

As for 2012, the mission believes that the additional measures
announced by the government, in combination with a determined
implementation of the adjusted Medium-Term Fiscal Strategy, should be
sufficient to bring the fiscal program back on track and ensure that the
deficit target of EUR 14.9 billion will be met.

Looking to 2013-14, additional measures are likely to be needed to
meet program targets. Such measures should be adopted in the context of
an update of the Medium-Term Fiscal Strategy by mid-2012. To ensure that
the program is growth-friendly, and in view of the ambitious assumptions
regarding improvement in revenue administration already embedded in the
Medium-Term Fiscal Strategy, it is essential that such measures focus on
the expenditure side.

In the area of privatisation, progress has been achieved with the
creation of a professionally managed privatisation fund. However, delays
in the preparation of the assets for privatisation, and to some extent
worse market conditions, mean that revenues in 2011 will be
significantly lower than expected. The government remains, however,
committed to the revenue target of EUR 35 billion by the end of 2014.
Ensuring that the privatisation fund remains independent from political
pressures remains key for success in this area.

Banks have improved their capital base through market-based means.
As evident from this weekends resolution of Proton Bank, the recent
amendment of the banking law ensures that non-viable banks can be wound
down while protecting depositors’ interest and preserving the stability
of the financial system.

As to structural reforms, areas of progress include the transport
sector, licensing procedures, and regulated professions. As overall
progress has been uneven, a reinvigoration of reforms remains the
overarching challenge facing the authorities. In this regard, the
decision to suspend the mandatory extension of sector-level collective
agreements to the firm level is a major step forward, as it will help
ensure the flexibility in the labour market needed to boost growth and
prevent high unemployment from getting entrenched.

Overall, the authorities continue to make important progress,
notably with regard to fiscal consolidation. To ensure a further
reduction in the deficit in a socially acceptable manner and to set the
stage for a recovery to take hold, it is essential that the authorities
put more emphasis on structural reforms in the public sector and the
economy more broadly.

The success of the program continues to depend on mobilizing
adequate financing from private sector involvement (PSI) and the
official sector. Ongoing discussions on PSI together with assurances
provided by European leaders at their July 21 summit suggest that the
program remains fully financed.

Once the Eurogroup and the IMFs Executive Board have approved the
conclusions of the fifth review, the next tranche of EUR 8 billion (EUR
5.8 billion by the euro area Member States, and EUR 2.2 billion by the
IMF) will become available, most likely, in early November.

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