(Bloomberg) — Euro-area officials said they looked forward to working with the new Greek government but warned the incoming administration that it needs to stick to post-bailout commitments.
Finance ministers from the currency bloc discussed the latest report by Greece’s creditors during their monthly meeting in Brussels, which highlighted the difficulties the country may face in meeting its fiscal targets for this year due to the previous government’s spending measures.
Greece has agreed to annual primary surpluses of 3.5% of gross domestic product until 2022, but newly elected Prime Minister Kyriakos Mitsotakis reiterated Sunday that one of his priorities is to lower the targets. The need to maintain a stellar fiscal performance in perpetuity was part of the debt relief deal agreed with Greece’s euro-area creditors last year, and failure to meet its targets could lead to suspension of some relief measures.
Any plans to loosen fiscal policy could throw Greece’s debt sustainability projections off course, raising new doubts about the country’s finances. The 3.5% surplus target “is a cornerstone of the program,” said Klaus Regling, the head of the European Stability Mechanism. “It’s a precondition for debt relief measures,” he said, adding that it’s “very hard to see how debt sustainability can be achieved without that.”