IMF report: Greece doing well but needs more reforms

13:16 6/6/2013 - Πηγή: Matrix24

Speaking to the press about the 385-page report, Thomsen said “Greece is well on its way to completing its fiscal consolidation, but it still has some way to go,” mentioning specifically the need for “structural reforms to enhance productivity” to create growth and creating more jobs.

He also recognised mistakes the IMF made in the multipliers it had used to calculate the fiscal adjustment

programme and said that the haircut should have been done earlier.

During the press briefing, Thomsen said that the continuing problems included restrictions in professions, product markets and services markets that had kept sectors closed and prices elevated; over-the-counter products sold only in pharmacies, which kept prices high; tax evasion by the “very large self-employed sector, including the wealthy”; and tax administration and public sector reforms that were needed to reduce costs and improve efficiency.

“There have been no mandatory dismissals yet in the public sector, despite widespread job losses in the private sector,” Thomsen said. “Those in the publc sector who are unqualified or low-performing have continued to have protected jobs, making it more difficult to improve the quality of public services and hire better-qualified workers from the large ranks of the unemployed.”

Reforms in these key areas “should make resource allocation more efficient and increase productivity,” he said, as well as “result ina more equitable distribution of the burden of adjustment.”

In its report, the IMF has admitted to mistakes in managing the Greek programme and said it underestimated considerably the effect of its measures on the Greek economy. It also called for consistency in the adherence to the agreement, opposed tax reduction right now and repeated that any loosening of austerity must be preceded by verification of fiscal balance. If the agreement clauses are not observed, it warned of more measures in 2017. It also said that any reduction in VAT for the food sector will be contingent on fiscal progress and flexibility.

It proposed the re-privatisation of banks, warning about the possibility of “continual credit asphyxiation” and pointing out the necessity of political stability for the fiscal programme to be applied. In Thomsen’s words, “The government now has a majority stake in a lot of these banks, so it’s important that the authorities push ahead with ensuring government safeguards are there, so these banks are run on commercial terms; and that the government moves forward to reprivatise the banks as rapidly as possible.”

According to the IMF’s assessment, recession this year would run at 4.2 pct, with a return to growth of 0.6 pc in 2014. The greatest growth will occur in 2016, followed by a slowing down of the economy.

The Fund’s report – which also includes a review of the first programme, from 2010 to 2012, including the mistakes made by the Fund that contributed to a greater recession and higher unemployment – assessed that Greece’s ability to repay the IMF loan would depend on two factors, Europe’s assistance in reducing the debt and Greece’s observance of the fiscal programme.

The IMF did not shy away from blaming the EU member-states from delays in taking decisions at state level and at having no experience in handling the economic crisis.

At the press conference, Thomsen concluded, “Greece’s European partners have also promised to provide any additional debt relief required to keep it on this path, provided of course that Greece implements the program as promised. In concrete terms, they have committed to take any necessary measures to reduce the country’s debt to 124 percent of GDP in 2020, and substantially below 110 percent in 2022, provided Greece meets its fiscal targets.”

source: ΑΜΝΑ