Lessons from Financial Assistance to Greece

Lessons from Financial Assistance to Greece Independent Evaluation ReportIndependent Evaluation INDEPENDENT EVALUATION REPORT — Lessons from Financial Assistance to Greece Print ISBN 978-92-95085-78-7 doi:10.2852/082453 DW-01-19-845-EN-C PDF ISBN 978-92-95085-79-4 doi:10.2852/04790 DW-01-19-845-EN-N More information on the European Stability Mechanism is available on the Internet (http://www.esm.europa.eu) Luxembourg: Publications Ofce of the European Union, 2020 © European Stability Mechanism, 2020 Reproduction is authorised provided the source is acknowledged. Printed in Luxembourg Printed on process chlorine-free recycled paper (PCF) ESM Evaluation – Lessons from Financial Assistance to Greece | June 2020 Contents Foreword �� 3 Executive summary �� 5 Main fndings �� 5 Recommendations �� 9 1. Introduction �� 13 1.1. Overview �� 13 1.2. Mandate and supporting structures �� 14 1.3. Setting the scene �� 16 1.4. EFSF and ESM fnancial assistance �� 21 2. Approach and methodology �� 27 2.1. General approach �� 27 2.2. Intervention logic �� 29 3. Assessment – Relevance �� 33 3.1. Strategic objectives �� 33 3.2. Programme strategies �� 36 3.3. Was something fundamentally wrong or missing? �� 44 3.4. Conclusions �� 47 4. Assessment – Effectiveness �� 49 4.1. Restoring public fnances �� 50 4.2. Structural reforms to improve competitiveness and productivity �� 58 4.3. Strengthening institutions �� 65 4.4. Efforts to promote inclusive growth �� 67 4.5. Banking sector �� 69 4.6. Unintended consequences of the EFSF/ESM programme �� 73 4.7. Conclusions �� 75 5. Assessment – Efciency �� 77 5.1. Programme fnancing �� 77 5.2. Use and sizing of fnancial assistance �� 78 5.3. The link between conditionality and disbursements �� 81 5.4. Size and fnancial structure of disbursements �� 84 5.5. Lending terms �� 86 5.6. Conclusions �� 89 1 6. Assessment – Sustainability �� 91 6.1. When to expect full benefts from structural reforms �� 92 6.2. Capacity building and technical assistance �� 94 6.3. Institutionalisation of reforms and best practices �� 96 6.4. Resilience of the Greek economy to shocks �� 97 6.5. Conclusions �� 105 7. Assessment – Cooperation and partnerships �� 109 7.1. Why is cooperation important? �� 110 7.2. Cooperation between the ESM and its partner institutions �� 110 7.3. Cooperation with the Greek authorities �� 113 7.4. Challenges to cooperation posed by debt sustainability assessments �� 115 7.5. ESM’s engagement �� 116 7.6. Synergies beyond the primary partnership �� 119 7.7. Importance of communication and policy advocacy for programme success �� 120 7.8. The role of the ESM in the post-programme period �� 122 7.9. Conclusions �� 125 8. Conclusions �� 129 Recommendations by the High-Level Independent Evaluator �� 137 References �� 143 Acronyms and country codes �� 157 Endnotes �� 159 Foreword This evaluation assesses the EFSF and ESM fnancial assistance provided to Greece, focusing on the ESM programme. The extraordinary support provided to Greece in the past decade helped the Greek economy to stabilise and to grow – despite present shocks. The fnancial assistance also enabled Greece’s institutions to improve and better meet European standards. At the same time, Greece and its citizens suffered the consequences of eight years of economic adjustment. Greece made the world’s headlines with the largest debt restructuring in history, an unprecedented fscal consolidation, and the resulting loss of output and social consequences. The programmes raised fundamental questions about the economic, fnancial, and political interdependence of the currency area. On 21 February 2019, the Chairperson of the ESM’s Board of Governors appointed me to lead this independent evaluation. The purpose of the exercise was to draw lessons from the EFSF/ESM fnancial assistance programmes to support informed policy decision-making going forward, to further increase the transparency and accountability of the ESM’s programme activities, and to enhance the ESM's ability to tackle future crises. The evaluation assesses the EFSF/ESM programmes’ contribution to euro area fnancial stability, their relevance to promote sustainable growth and resilience of the Greek economy to shocks, as well as the efciency and effectiveness of the ESM’s engagement with national and international partners. To carry out its analysis, the evaluation team conducted desk studies, surveys, extensive interviews with authorities in Greece and international partner institutions and assessed input from other evaluations and published literature. Five background papers and a technical appendix complement this evaluation report. I would like to thank the dedicated evaluation team under the leadership of Kari Korhonen with Rolf Strauch as the project sponsor. Composed of Olga Francová, John Goossen, Dušan Kovačević, Georgios Palaiodimos, Dóra Siklós, Carsten Eppendorfer, and Iakov Frizis, the team worked independently of the ESM to deliver an unbiased assessment of the programmes. I would also like to thank the external advisory group for this evaluation and all those who contributed with responses, comments, and through frank discussions during the months this report was drafted. I hope the fnal report will provide a useful basis for refection by everyone who has a stake in stability and prosperity, both in Greece and in the euro area as a whole. My recommendations are meant to inspire follow-up work, so that the ESM, in collaboration with its partner institutions, may build further on its role as a guardian

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