Brussels, 06/05/2013 (Agence Europe) - In a report published on Monday 6 May after a fact-finding mission in Athens, the International Monetary Fund (IMF) says Greece is making exceptional progress in its budget adjustment despite “very serious and socially painfull recession. (…) However, insufficient structural reforms have meant that the adjustment has been achieved primarily through recessionary channels, with unequal distribution of the burden of adjustment”.
The report highlights shortcomings in tackling tax evasion and improving competition on the labour market, which could ensure a rebalance. The IMF is unhappy about the rising unemployment in the private sector, while the public sector remains overstaffed due, it says, to a taboo on making civil servants redundant. It welcomes the government's recognition of the problems and efforts to change tack.
The IMF says there is no scope for greater public spending cuts or higher taxes, but additional measures will, nevertheless, be required to meet the medium-term targets, despite the relaxing of the targets by Greece's partners.
After six years of recession, Greece is expected to return to growth in 2014. While the stronger, recapitalised banking system is likely to support economic recovery, the challenge now is to restore confidence in order to encourage investment. “The lessons of the recent past are that only with full and timely policy implementation and commitment to the programme can the fundamentals for a recovery be put fully into place”, says the IMF.
The International Monetary Fund says that Greek public debt is too high, despite the moves made in 2012 to reduce it. Despite the private sector involvement in the Greek bond write-down in the spring of 2012, the debt buy-back in December of that year and the easing of loan terms by the eurozone, the debt-GDP ratio is expected to reach 175% in Greece in 2014, according to the European Commission's spring economic forecasts (see EUROPE 10839). The IMF highlights the pledge by Europe to consider extra measures to reduce the Greek debt burden. (EL/transl.fl)