Washington: The International Monetary Fund said Friday that the fiscal projections underpinning Greece’s proposals for moving ahead in its bailout program are not realistic.
Poul Thomsen, director of the IMF’s European Department, raised questions about the forecast that Greece could maintain a 3.5 per cent budget surplus for years as part of its plan for debt relief from European Union creditors.
“We question whether it is plausible for a country with such high unemployment and the attendant social pressures to be running such big surpluses over many political cycles to come,” Thomsen said at the spring meetings of the IMF and World Bank in Washington.
“So we are cautioning that ... the debt relief needs to be calibrated on something that we think is more realistic.”
Thomsen was speaking after Greek Prime Minister Alexis Tsipras wrote in an article published in the Financial Times that the IMF should stop tinkering with the country’s latest bailout with European creditors, blaming the global lender for causing a delay in talks.
The IMF has been standing by with the possibility of adding its funds to the country’s third bailout programme with the EU but says it needs to see a strong package of structural reforms and a “credible” plan for growth and fiscal adjustment going forward.
Thomsen said the IMF could back the outlined EU-Greece plan but has to understand how fiscal targets and a return to economic growth can be achieved.
To reach the 3.5 per cent target, he said, Greece would need to take large fiscal measures, the equivalent of around 4.5 per cent of GDP.
“We think that’s a lot. That’s a lot of — if you want — austerity,” he said.
“If Greece and its European partners want to stick to that target, we can accept that target. But we need to see the measures.”
He said the IMF still believes Athens needs to prioritise structural reforms, particularly in tax collection.
“Tax evasion has kept on going up and up, and tax collection rates have gone down and down and down ... the numbers are truly extraordinary,” he said.
He noted that Greece exempts 55 per cent of households from taxes, compared to two per cent in Portugal.
“What we need to do is to broaden the tax base ... that’s the first point of discussion.”
Speaking later, US Treasury Secretary Jacob Lew called for the parties to move urgently to resolve their differences.
“This is a problem that needs to be solved and it needs to be solved as quickly as possible,” he told journalists.
“The solution is not for any one party to say they would walk away, but for all the parties to make the tough decisions about how to get those issues resolved.”
“Greece has implemented many difficult policies but there’s still a gap and that gap needs to be fixed,” Lew added.
