Dombrovskis: Priority is getting Greece to grow

Latvia's European Commission Vice President Valdis Dombrovskis appeared on LTV Monday morning to stress that despite Greece's current financial woes, the country could quickly return to growth - but only if it is serious about reform. 

“The first package of reforms has already been passed by the Greek parliament and this week the next vote will be about the next package," Dombrovskis said on the Rita Panorama morning news show.

“It's necessary to see from the Greek government a clear plan showing how they will revive financial stability, economic growth and how at the same time in coming years they will pay off their debts," he said.

“The European Commission has considered various scenarios and the one we prefer is that Greece remains in the eurozone and conducts the necessary reforms... but those reforms have to continue into the future for things to improve.”

The main task facing the Greek government is to revise its policies so that the country has a chance of returning to strong economic growth, Dombrovskis insisted.

"We saw at the end of last year that Greece had returned to growth and we were in the position of talking about Greece as one of the fastest growing economies in the eurozone with strong job creation... it was starting to return to the financial markets to ensure financial stability and economic growth. Greece was coming out of crisis. But unfortunately during the last half year Greece has headed back into crisis," he said.

A return of economic growth, "could happen quite quickly" the former Prime Minister said.

Having steered Latvia through its own major financial crisis, Dombrovskis said he understood the lack of sympathy being expressed in Latvia and elsewhere for the Greek situation but stressed that Greece's recession is now even deeper than Latvia's was int he dark days of 2008-10.

"Latvia is not the only country where people have a strongly negative view of this [bailout], not least because of the Greek government's rhetoric on the subject, but the European stability Fund exists in order to help countries that are in financial trouble. Latvia at one time was in trouble and took international bailout loans which also called for serious policy measures... the [austerity] in Greece up until now is actually larger than that in Latvia if we talk about it as a percentage of GDP," Dombrovskis said.

He also signalled that there were no plans yet for Latvia to make any additional payments into the European Stability Fund to bail out Greece, other than its standard obligations. 

Later on Monday, Dombrovskis appeared on Latvian Radio where he commented the structural mistakes that were made during the creation of the Eurozone, which were felt during the 2010-2011 years of crisis.

He said that a lot has been done to stabilize the situation, and cited the current problems in Greece as an example, saying that "There isn't a panic reaction against the other Eurozone countries. Greece is seen as an isolated case that doesn't threaten the financial stability of the whole Eurozone."

Dombrovskis said that after the crisis, the coordination of fiscal and macroeconomic management has become much better, and a bank union has been created with a unified supervision mechanism.

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