Brussels, 02/06/2014 (Agence Europe) - On 30 May, the International Monetary Fund (IMF) gave the go-ahead for €3.41 billion for Greece.
The IMF warns: “Additional fiscal adjustment is necessary to ensure debt sustainability, through durable, high-quality measures, while strengthening the social safety net”. The most recent European Commission follow-up report revealed a slight deviation from the Greek debt trajectory. Despite measures to the order of 2.7% and 1.4% of GDP that the eurozone is planning to take to reduce the Greek debt burden, the debt as a proportion of GDP targets for 2020 and 2022 are not expected to be fully met although there will not be too great a gap.
Naoyuki Shinohara, the IMF's deputy director general, said: “The Greek authorities have made significant progress in consolidating the fiscal position and rebalancing the economy. The primary fiscal position is in surplus ahead of schedule, and Greece has gone from having the weakest to the strongest cyclically-adjusted primary fiscal balance in the euro area in just four years. However, several challenges remain to be overcome before stabilization is deemed complete and Greece is back on a sustainable, balanced growth path. It is essential that the authorities continue to improve tax collection, combat evasion, and strengthen expenditure control. Public administration reforms need to be accelerated. The authorities are taking remedial actions to clear domestic arrears and expedite privatization. Despite significant wage adjustment, export performance remains comparatively weak. The redoubling of efforts to liberalize product and service markets is therefore welcome. Further measures are necessary to remove regulatory barriers to competition in key sectors and to reform investment licensing. The authorities are committed to revitalizing labor market reforms and improving the business climate. Addressing the very high level of nonperforming loans remains an important priority. While there is no acute stability risk, it is critical for the economic recovery that banks be adequately capitalized upfront to recognize losses on the basis of realistic assumptions about loan recovery. Efforts are being made to recapitalize the banking system and set aside the buffer of the Hellenic Financial Stability Fund to deal with contingencies that may arise during the program. The private debt resolution framework should also be strengthened expeditiously”.
New €10 billion loan? In an interview with Focus on Monday 2 June, German Finance Minister Wolfgang Schäuble said Greece might be granted a new loan of up to €10 billion. (EL)