Greece needs more European money to help with debts, says IMF
18 January 2013
Protesters clash with riot police officers during a 24-hour nationwide general strike on October 18, 2012 in Athens, Greece. Photo: Getty Images
Greece will need additional help from its European partners as soon as next year to bring its huge debt under control, a senior IMF official has said.
"There is a gap according to our preliminary projections for 2015-2016" of up to "€9.5bn," Poul Thomsen, the IMF's mission chief for Greece, told a conference call. The EU and IMF have committed a total of €240bn in rescue loans to Greece since 2010, but with its economy entering a sixth year of recession it is still having trouble making budget ends meet, AFP reported. "The IMF's policy is that the programme needs to be fully financed for the 12 months ahead... What is key is that the Europeans know there is a gap and they'll have to fill it," he said.
Meanwhile, an IMF report into Greece has concluded that "the rich and self-employed have continued to evade taxes on an astonishing scale and bloated and unproductive state sectors have seen only limited cuts". "Moreover, labour has shouldered too much of the burden as lower wages have not resulted in lower prices, because of failure to liberalize closed professions and dismantle barriers to competition. While the economy is now re-balancing apace, this is happening mainly through recessionary channels, rather than through productivity boosting reforms. Meanwhile, the mounting sense of social unfairness is undermining support for the program," the report added. "The new government acknowledges that the program will fail unless it overcomes these entrenched vested interests."
Despite the two EU-IMF bailouts as well as a private-sector debt cut, the continuing recession and deficits mean that Greece's debt mountain is set to continue to rise to 190pc of output in 2014. The IMF has been pressing Europe to do more to resolve the Greek debt crisis, after the Fund extended its Greek rescue loan to four years from three years and lowered the interest charged on it. Eurozone countries have so far ruled out writing off any of the bailout loans they have provided Greece. Germany, which would bear the brunt of any writedown as having the biggest eurozone economy it is the biggest bailout contributor, holds general elections later this year.
The IMF on Wednesday unblocked a frozen slice of €3.2bn from its outstanding aid package. But Thomsen insisted on Friday: "We only went ahead because we got assurances from the Europeans that they would provide the money" for Greece's future needs, before the country can return to the markets for financing. He said the IMF did not think it was "realistic" that Greece would return to borrowing markets before the end of 2014. "We have a need for more money from the official sector. And there is a commitment to provide that. The EuroGroup has said 'we will do so if there is no return to markets'," Thomsen said.
Speaking earlier to an internal IMF survey interview, Thomsen noted that Athens had made major progress in slashing its deficit but a "fragile" political scene means more work is needed to cement reforms that will restore confidence. After three years of austerity cuts, Greece is "more than halfway" into addressing its huge fiscal deficit by improving the primary balance by around nine percent of output, he said. But Thomsen warned that the socio-political setting in the country "remained fragile" and that any new uncertainty could make investors and consumers hold back. "For consumers and investors to regain confidence, they will need to believe that the programme can gain the necessary political support to be successful," said the Dane, a senior member of the team of auditors that is monitoring Greece's recovery in return for bailout loans.
The coalition government of Prime Minister Antonis Samaras has been hit with several defections in the past few weeks in opposition to the continued austerity wave. The three-party coalition has lost 16 deputies since coming to power in June, and currently has a nominal majority of 163 in the 300-seat parliament.
To avoid further wage and pension cuts, which could threaten the cohesion of the coalition, it is "critical" for the government to "seriously" tackle tax evasion and complete a downsizing of the bloated public sector, Thomsen said. This is likely to face strong resistance from unions, who have held waves of general strikes and often violent protests against such measures in the past. "Institutional change will take time and strong commitment. In Greece, we're still closer to the start of the process than to the end," Thomsen said. "If it implements the programme as agreed, Greece will survive and prosper in the eurozone. We are not there yet," he said.
Source: Telegraph UK.
Add your comment
|< Prev||Next >|