National Reform Programme 2016
1.1 Overview of the macroeconomic scenario The economic adjustment programme that Greece has been following since 2010 has significantly ameliorated the fiscal and external imbalances of the Greek economy but with serious implications in terms of growth potential, debt sustainability and socioeconomic conditions. Between 2010 and 2014 there was a 13.4 percent decline in growth potential (DG ECFIN Economic Forecasts). Over the period from the end of 2008 until the end of 2015 the Greek economy has contracted cumulatively by more than 25 percent as measured by real GDP, intensifying the debt dynamics and contributing to the self-reinforcing nature of the crisis. Public debt has increased from 109.3 percent of GDP in 2008 to 180.2 percent of GDP in 2015, despite a major debt restructuring (PSΙ) in 2012. Public debt overshot the programme’s projections by a large margin. As the programme unfolded, the underlying debt dynamics worsened significantly because output contractions and deflation were more pronounced than expected. Lower nominal growth raised the interest rate-growth differential and led to progressively higher expected debt paths. The strenuous economic adjustment effort has evoked several adverse socioeconomic effects.
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