Brussels, 12/02/2016 (Agence Europe) - Poul Thomsen, head of the IMF's Europe department, said on an IMF blog on Friday 12 February: “We have yet to see a credible plan for how Greece will reach the very ambitious medium-term surplus target that is key to the government's plans for restoring debt sustainability. This emphasis on credibility is crucial for generating the investor confidence that is critical to Greece's revival. A plan built on over-optimistic assumptions will soon cause Grexit fears to resurface once again and stifle the investment climate.”
He added: “But can't Greece protect pensioners by cutting somewhere else or increasing tax rates? There is some scope for those measures, but it is very limited. Most other spending has already been cut to the bone in an effort to protect pensions and social payments, while the failure to broaden the base and improve compliance has already caused too much reliance on high tax rates. To reach its ambitious medium-term target for the primary surplus of 3½ percent of GDP, Greece will need to take measures in the order of some 4-5 percent of GDP. We cannot see how Greece can do so without major savings on pensions.”
Asked about the blog, European Commission spokesperson Annika Breidthardt said on Friday 12 February that the European institutions were “still working on the package of measures to reach the fiscal target agreed in the MoU. The Greek authorities still need to adopt significant package of measures to reach the agreed target, the view of the European institution is that the scale of what is needed is in line with what was agreed in the MoU in August.”
After the Eurogroup meeting on Thursday, Economic and Financial Affairs Commissioner Pierre Moscovici said: “Need to have more talks, especially on the fiscal gap and the way to fill it. It is necessary for technical teams to work on these.” The institutions have broken off their monitoring mission and are awaiting more information from Greece before returning. The Commissioner hoped the mission would be completed by Easter, which is celebrated by most people living in Brussels (in other words at the end of March). He said that postponing painful reforms again would not make them any easier.
European Stability Mechanism (ESM) director general Klaus Regling mentioned “Two positive elements; revenues have developed better than expected, and a substantial amount of the programme has been transferred to the Greek budget so it is a little bit easier for the immediate future.” At the last Eurogroup meeting, he expressed concern about the liquidity situation, which he said would get tricky in February.
In the blog, Poul Thomsen said: “No amount of pension reforms will make Greece's debt sustainable without debt relief, and no amount of debt relief will make Greece's pension system sustainable without pension reforms. Both need to come about.” Debt relief will be disucssed by eurozone finance ministers when the first monitoring mission is complete. (Original version in French by Elodie Lamer)