The latest bailout program to avoid a sovereign debt crisis in Greece might actually work, according to a report by the Paris-based OECD (Organization of Economic Cooperation & Development) which groups the world’s more developed countries.  

In presenting the report (August 2), OECD Secretary-General Angel Gurria said, “We are seeing the first signs that the much needed macro-economic adjustment is gradually taking place.”

Gurria praised Athens for reforms carried out over the past year. “This achievement does not always seem to be properly appreciated in Greece or abroad,” he said, stressing that continuing implementation of the rescue plan must be ‘impeccable’.

“No other OECD country has achieved such a fiscal improvement in a single year over the past three decades,” the report noted and called on Athens to reinforce labor reforms to encourage competitiveness and raise incomes and eventually cut public debt. The report said reforms laid out in the July package, taken together, “could reduce public debt to below 60% of GDP in two decades from an all-time high of 140% in 2010”.

In the July deal, eurozone leaders included a key demand by German Chancellor Angela Merkel for voluntary participation from private financing institutions to slash Greece’s borrowing costs and lengthen the maturities of loans.  The package was designed to give Greece more time to carry out fundamental reforms in order to restore confidence in the face of a crisis that has since spread to Italy and Spain.

“A key prerequisite of success,” noted Gurria, “is that the burden and benefits of reform be, and be seen to be, broadly and fairly shared.”  Among the recommendations in the plan is that widespread tax evasion must be “visibly and decisively attacked”.  In its report, the OECD suggested awarding bonuses to the best performing tax collectors and ‘naming and shaming’ evaders.

Meanwhile, protest demonstrations have continued in Athens indicating the depth of resistance to the ongoing period of painful economic adjustment.