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“A credible commitment to reducing fiscal imbalances on a sustainable basis is essential for restoring market confidence, creating room for future budgetary manoeuvre and meeting the rising costs of an ageing population,” mentioned by OECD for Greece on Thursday. “To achieve this, strict control of spending and curbing widespread tax evasion are vital. Long–term fiscal viability also calls for further pension and health care reforms,” it adds.

Increasing labour and product market flexibility will be important to achieve high rates of growth also said the organisation.

OECD projects that the planned government measures may bring public deficit at 9¾ per cent of GDP. However, as some of the measures to be adopted in 2010 are temporary, it says the deficit would widen to around 10% of GDP in 2011 with unchanged policies, while the public debt will rise to above 120% of GDP.

It stresses that these “projections reinforce the urgent need for a strong commitment to a sustainable fiscal consolidation. This can be achieved through well designed measures to eliminate structural deficits, a more restrictive budgetary rule, and greater independent oversight of budget execution. A strong and credible multi-year fiscal consolidation programme is imperative to restore room for stabilisation policy, reduce sovereign spreads and meet social and economic challenges.”

Furthermore, it calls the Greek government to tackle tax evasion, estimating that the Greek economy will shrink 0.7% next year.