EU law requires all member states to keep their national deficits as low as possible, and a deficit above 3 percent of a member state’s gross domestic product triggers a demand by the EU for austerity. EU lawmakers demanded that from Greece in 2009, when its deficit reached a staggering 15.1 percent of GDP.
Although the austerity measures strained Greece’s ties to the EU – and the Greek people’s patience with both their government and the EU – a third bailout in 2015 appears to have helped right the Hellenic Republic’s financial ship: it had a small surplus in 2016. And although the government anticipates a small deficit again this year, EU lawmakers said the fiscal forecast shows continued improvement over the next three years.
The European Commission, the EU’s regulatory and administrative body, applauded the decision to relax the measures against Greece.
“Today’s decision by the Council is a recognition of the tremendous efforts and sacrifices the Greek people have made to restore stability to their country’s public finances,” economic commissioner Pierre Moscovici said in a statement. “The turnaround since 2009 has no parallels in Europe. We now need to ensure there is constructive cooperation between all institutions and the Greek authorities to ensure a smooth and swift conclusion of the third review. That will pave the way for a successful conclusion of the program next summer and for the opening of a new and optimistic chapter for Greece and for the euro area as a whole.”
The EU will continue to monitor Greece’s fiscal health under its preventative program known as the stability and growth pact. Three other EU states – France, Spain and the United Kingdom – are also being monitored under that pact, a far cry from the 24 member states being monitored in 2011 at the height of the fiscal meltdown.
Greece has promised to run budget surpluses until 2022 and then maintain “a fiscal trajectory that is consistent with EU requirements,” the Council of the European Union said in a statement.