IMF Cites Greek Progress, But Says Debt Will Linger

The International Monetary Fund, one of Greece ‘s Troika of international lenders, said in a report released June 10 that the government has made “significant progress” in fixing a broken economy but that it will take years to bring debt down to sustainable levels. The IMF, which along with the European Union and European Central Bank has put up 240 billion euros ($327 billion) in two bailouts since 2010, said Greek debt is expected to remain high “well into the next decade,” peaking this year at an expected 174 percent of Gross Domestic Product. Greece has essentially been treading water for four years, using the bailouts to repay banks instead of using the monies for social programs at the same time the government has imposed harsh austerity measures that have created record unemployment and deep poverty. For all that, the debt is still 315 billion euros ($430 billion) and Prime Minister Antonis Samaras said he wants to ask the Troika for debt restructuring including the possibility of not repaying all it owes, which would pass on the bill to the taxpayers in the other 17 Eurozone countries, a political hot potato for their leaders. The IMF urged the government to increase efforts to liberalize markets, combat tax evasion and speed up public administration reforms. It also said it should help its exporters become more competitive and the banks deal with “a mountain of bad loans,” all reforms which the government has failed to do despite constant prodding. “There’s still a bit to go, but I would say that Greece is close to the goal line,” on improving its public finances, Poul Thomsen, head of the IMF’s mission in Greece, said in a conference call with reporters. The IMF report noted the country was falling behind in required labor market reforms, and said additional savings measures were needed to plug a public financing gap in 2015-16. Greece has pledged to extend austerity taxes that had been imposed temporarily, as a means of bridging the gap, although Samaras said there wouldn’t be a gap and that he wouldn’t impose any more austerity conditions ever. Thomsen said it was too early to say whether Greece would require additional money beyond the 240 billion euros ($325 billion) already granted in bailout loans. “Yes, at this stage we do see a funding need. But it is quite possible that there are sources for closing it that would mean that there might not be the need for (eurozone) member states to approve new money,” he said. “It’s too early to say.” The IMF, Thomsen said, backed government pledges not to impose new cross-the-board pay cuts and to begin easing taxes at the same time it’s continuing taxes it had promised to reduce or eliminate.

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