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EU Commission says Greece public finances back in order

The EUs financial services commissioner Valdis Dombrovskis

Greece’s fiscal position has improved and the European Union should end disciplinary procedures against it over its excessive deficit, the EU commission said on Wednesday, paving the way for the country to return to international bond markets.

EU fiscal rules oblige member states to keep their budget deficits below 3 per cent of their economic output or face sanctions that could entail hefty fines, although so far no country has received a financial penalty.

Greece recorded a 0.7 per cent surplus last year and is expected to have a deficit of only 1.2 per cent in 2017.

“Our recommendation to close the excessive deficit procedure for Greece is another positive signal of financial stability and economic recovery in the country,” EU Commission Vice President Valdis Dombrovskis said in a statement.

Ending the procedure – a step that must still be confirmed by EU states – would further reduce the pressure on Athens after eurozone creditors unblocked new loans to it worth €8.5 billion last week as part of its €86 billion bailout programme.

The move, which was widely expected, should help Greece in issuing new bonds in the coming weeks or months. With the exception of two bonds in 2014, Athens has been absent from the markets since the start of the euro zone debt crisis in 2009.

The Greek economy is expected to grow 2.1 per cent this year, above the eurozone average, according to commission forecasts, although its unemployment rate remains the highest in the EU at 21.7 per cent in April.

Returning to the markets would help Greece smoothly end its latest bailout programme, the third since 2010, which is due to end in August 2018. Eurozone creditors are encouraging Greece to test the markets before the conclusion of the financial aid programme.

Investors and bankers told Reuters on Tuesday that Greece could return to markets in the next few weeks.

As the bloc’s economy is firmly on a recovery path, only France, Spain and Britain remain under the fiscal disciplinary procedure for their excessive deficit.

The French government has reassured Brussels of its intention to bring its deficit below 3 per cent of output from 3.4 per cent last year.

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