Greece’s fiscal outlook after 2014 remains “inherently uncertain” and will be the focus of negotiations between Greece and its euro-area and International Monetary Fund creditors later this year, the European Commission said.

While Greece continues to make progress in its economic reform program under its bailouts from the euro area and the IMF, “major efforts” are needed in the fight against tax evasion, the European Union’s Brussels-based executive arm said in a report today. A fiscal gap of 1.7 percent of gross domestic product in 2015 and 2.1 percent in 2016 needs closing, according to the report.

“The fiscal outlook depends to a large extent on the strength of the recovery and improvement in taxpayer capability to service their tax obligations, as well as gains made from strengthening tax and social security administration,” the commission said. “The task of filling the gap in 2015-16 will be taken up in the context of the 2014 budget negotiations in the autumn.”

Since a budget deficit more than five times the euro area’s permitted limit forced Greece into its bailout in May 2010, the troika of officials from the commission, the IMF and the European Central Bank have held quarterly reviews and negotiations with Greek authorities on its compliance with the terms of the 240 billion euros ($309 billion) of loans.

Budget Deficit
The commission’s report today forecasts the budget deficit will narrow to 3.3 percent of GDP next year from 4.1 percent this year, while public debt will peak at 175.2 percent of GDP this year before gradually declining. Economic output will contract 4.2 percent this year, its sixth year of recession, before GDP increases 0.6 percent next year “led by investment and exports.”

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