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IMF indecision on bailout criticised by Greek economy minister

Dimitri Papadimitriou said the Washington-based fund must decide whether the Greek recovery will happen with or without it

Image Credit: Bloomberg
A customer puts euro coins into her purse while shopping for groceries at a farmer's market in the old town district of Thessaloniki, Greece.
Gulf News

Athens: The time has come for the International Monetary Fund to make up its mind on Greece, according to the country’s economy minister.

The path to recovery runs sequentially through completion of Greece’s bailout review, debt relief and then admission to the European Central Bank’s quantitative easing programme, said Dimitri Papadimitriou, an economist who joined the government this month after a career championing alternatives to the macroeconomics espoused by the IMF. Now, the Washington-based fund must decide whether the Greek recovery will happen with or without it, he said in an interview.

“The IMF has changed its opinion many times,” said Papadimitriou, 70, who spent almost five decades in the US, where he is on leave from his post as president of Bard College’s Levy Economics Institute. “It’s very hard to know whether in fact they want to be in or they want to be out. I think they do want in, and we want them to be in.”

Greek markets have rallied this month on expectations creditors may finally ease the country’s debt at a Dec. 5 meeting of Eurozone finance ministers. For the International Monetary Fund to stay on board — a key demand of countries such as Germany and the Netherlands — such a deal must assuage the fund’s doubts about the viability of Greece’s medium-term fiscal targets. The country’s economy has contracted by about a quarter since the start of the global financial crisis in 2008.

Greece’s creditors

Officials representing Greece’s European creditor institutions and the IMF left Athens on Tuesday without concluding the country’s bailout review. Greek government spokesman Dimitris Tzanakopoulos implied that the IMF was setting obstacles to completing the bailout review. The government and the IMF remain apart on labour markets, which the fund wants to liberalise further while the government wants to restore some collective bargaining.

“We are standing firm because at the end, those reforms don’t really account for any growth,” said Papadimitriou, arguing that the IMF’s insistence on them has become a matter of dogma for the fund. “If you look at the projections that they have made, they have always been wrong. And we’re talking about being really wrong. However, if you have followed this procedure for so many countries, it is very hard to change it.”

Dutch Finance Minister Jeroen Dijsselbloem, who chairs the Eurogroup of Eurozone finance ministers, told Bloomberg on Thursday that officials representing the European creditor institutions and IMF have made much progress in talks with Athens, but that further reforms are being looked at in labour markets and privatisation. The Eurogroup has additional debt-easing measures ready “if needed” for when the Greek programme comes to an end in 2018, he said.

“At the end there’s always an agreement,” Papadimitriou said in the interview on Thursday. “It’s not an agreement that everybody likes, but I think it’s an agreement which each party can live with, given their own particular needs.”