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Greece must stick to reforms, fiscal targets, ESM's Regling says


By Lefteris Papadimas

ATHENS (Reuters) - The newly elected Greek government's reform drive is welcome, but the country must respect its post-bailout commitments, the head of the euro zone's bailout fund said on Tuesday.

Speaking in Athens after a July 7 snap election, which conservatives won promising investments and tax cuts, ESM chief Klaus Regling urged the country to continue with privatizations, reforms and to meet fiscal targets agreed with its lenders.

"The reform drive of the new government to stimulate the business environment and investment climate is welcome," said Regling.

"Although the government has just been elected and details remain to be seen, what is currently known seems promising to the extent that the country respects the established surveillance framework and its program commitments," he said.

Greece emerged from its third international bailout last August and has agreed to achieve primary budget surpluses - excluding debt servicing - of 3.5% of gross domestic product annually up to 2022.

Prime Minister Kyriakos Mitsotakis has promised higher-than- expected growth to negotiate a reduction in fiscal targets from 2020 onwards.

"Greece should make growth its top priority, while at the same time maintaining the agreed primary surplus," Regling told a conference in Athens.

Mitsotakis has also pledged to cut corporate, income and property taxes and wants to legislate a growth clause on the minimum wage, meaning increases will be twice the economy's expansion rate.

Underlining that reform implementation slowed in recent months, Regling advised that any increases in the minimum wage should be in line with productivity growth. A reduction in tax rates could be coupled with a broader tax base, he said.

Growth and a fiscal surplus are key conditions for debt sustainability, while reforms are necessary to improve productivity and competitiveness, Regling said.

Speaking at the same conference, Finance Minister Christos Staikouras said, "Our central strategic goal is the expansion of the economy at higher rates, with healthy public finances and a steady banking sector."

(Additional reporting by Angeliki Koutantou; writing by Renee Maltezou and George Georgiopoulos; editing by Larry King)

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