Brussels, 21/01/2013 (Agence Europe) - Greece's future in in its own hands, said Christine Lagarde, the director general of the International Monetary Fund (IMF), in Greek newspaper Kathimerini on Sunday 20 January. At the end of last week, the IMF issued a report stating that one of the main risks to the Greek structural adjustment programme was the danger of political fallout. The document highlights the fact that Greek residents are becoming disillusioned with the reforms as the country enters its sixth year of a shrinking economy.
Lagarde listed three priorities that the goverment must get its teeth into, the first being improving the tax system (including an effective fight against tax evasion). The IMF report says that little has been achieved in this area over the past ten months. The Greek government voted through tax reforms earlier this month, which were a precondition for resumption of aid from the IMF (see EUROPE 10766) and will pave the way for disbursement of a new installment of aid from the eurozone on Monday. The second priority is the privatisation programme. Both the IMF's report and the European Commission's report regret that the targets have been missed by a wide margin. Greek Prime Minister Antonis Samaras will be meeting on Monday with the heads of the Greek privatisation fund to discuss how the state can net some €2.6 billion. The final priority listed by the IMF is implementation of structural reforms to make Greece more competitive. Recognising that progress has been made on products and services, the report points out that pay cuts have yet to be matched by price cuts to help boost exports. Lagarde said that if the terms of the Greek programme are respected, no new measures will be needed and the country might even be able to borrow again unaided from the money markets towards the end of 2015.
Debt trajectory. Poul Thomsen, an IMF representative at the troika, says Greece's debt will be too high if there are not direct transfers of cash from its European partners or a fresh debt writedown. A shortfall of nearly €10 billion may emerge in the strategy to reduce the debt ratio to 110% of GDP in 2022. In December 2012, the IMF recommended far-reaching measures to ensure the Greek debt remains affordable (see EUROPE 10751). (EL/transl.fl)