A cargo vessel stands at its moorings in the commercial shipyard at Elefsina, Greece. The total debt of the country will peak at 177% of GDP this year and decline to around 125% by 2020, according to the EU report.

AFP/Athens

Twice bailed-out Greece has made enough progress in stabilising its public finances to make another international rescue less likely but its total debt remains dangerously high, an EU report showed yesterday.

“Greece has made delayed but eventually substantive progress” since mid-2013, when aid payments were delayed after Athens failed to meet tough targets laid down by its creditors.

“The fiscal performance continued to be strong,” the European Commission report said, with Greece reporting a better-than-expected primary budget surplus in 2013.

The surplus—the budget balance before interest payments and bank support—came to 1.5bn euros, equal to 0.8% of gross domestic product.

Combined with the latest government measures to adjust spending, this means Greece is on track to “secure the 2014 fiscal target” of its second bailout programme, the report said.

“It is essential to ensure that the ambitious reform agenda is fully implemented to close any remaining fiscal gaps,” it added. Over the 12 months to May 2015, Greece must find 7.5bn euros to balance the public finances.

This is down from previous estimates of 10-11bn euros after a successful government bond sale earlier this month raised 3.0bn euros.

The report said some 2.0bn euros needed by August could come from the commercial banks, who backed by new investors may redeem the government-held preference shares issued to support the lenders at the height of the debt crisis.

Extra funds could be raised by fresh government operations in the money markets or found in resources not being used elsewhere.

Such measures plus aid payments would also cover the 5.5bn euros due by May 2015, providing the “necessary reassurances that the programme remains sufficiently financed,” the report said.

If the immediate financing problems are under control, total debt remains extraordinarily high, the report showed, while giving no indication of how it could be brought down in line with the sharp forecast reduction.

Greece’s total debt will peak at 177% of GDP this year—way above the EU 60% limit—and decline to around 125% by 2020, the report said. This level is then supposed to drop to below 110% by 2022, assuming growth projections hold true.

Asked how the debt mountain could be reduced so quickly, an EU official said “that has not been part of the report. It is premature to answer this question.”

Having met the primary budget surplus target, Greece’s eurozone partners are committed to examining the country’s overall economic position later this year, amid speculation of perhaps a third rescue package or a debt write-off.

Greece hopes to avoid a third rescue but has said it needs its creditors to ease the debt burden so as to give the economy space to grow. The ‘Troika’ of the European Union, the European Central Bank and the International Monetary Fund rescued Greece twice, in 2010 and 2012, putting up 240bn euros in aid plus a hugely controversial private sector debt write-off for another 100bn euros.