Pace of re­forms must be kept up

IMF urges Athens to stick to goals; size of ad­di­tional Greek aid still be­ing worked on, says La­garde

Kathimerini English - - Business & Finance -

Greece’s gov­ern­ment must keep up the pace of change to pre­vent its pro­gram from fal­ter­ing, an In­ter­na­tional Mon­e­tary Fund of­fi­cial said yes­ter­day as Euro­pean Union lead­ers con­tinue to scratch their heads over how to tackle the Greek cri­sis.

“It is clear Greece is at a crit­i­cal point,” Bob Traa, the head of the IMF mis­sion in Greece, told a con­fer­ence in Athens. “The choice is be­tween bold re­form or to al­low the pace of re­forms to slow. The head­winds are dif­fi­cult for Greece right now.” With­out deeper re­duc­tions, the coun­try’s bud­get short­fall will re­main stuck at be­tween 9 per­cent and 10 per­cent of gross do­mes­tic prod­uct, Traa said. State as­set sales will be­gin “with­out de­lay” and Greek banks need to bol­ster their cap­i­tal buf­fers, he said.

“As long as doubts ex­ist about the as­sets held by the banks, whole­sale mar­ket ac­cess will likely re­main im­paired and, in this re­gard, larger cap­i­tal cush­ions will help to re­duce these doubts,” Traa said.

“Fi­nan­cial sec­tor sta­bil­ity plays a cru­cial role in this re­cov­ery. They have to sup­port fi­nan­cial sta­bil­ity and banks must do their part. In par­tic­u­lar, banks should seek fur­ther cap­i­tal and im­prove the mar­ket’s per­cep­tion of their val­u­a­tion.”

A year af­ter the bailout that aimed to stop the spread of the debt cri­sis, Greece re­mains mired in a third year of re­ces­sion, shut out of fi­nan­cial mar­kets and sad­dled with the big­gest debt load in the euro’s his­tory. Greece now needs a sec­ond res­cue pack­age to avoid the euro area’s first sov­er­eign de­fault.

The Wash­ing­ton-based IMF pro­vided 30 bil­lion eu­ros of Greece’s orig­i­nal loan bailout of 110 bil­lion eu­ros.

From New Delhi yes­ter­day, French Fi­nance Min­is­ter Christine La­garde said that the size of the ad­di­tional fi­nan­cial pack­age for Greece had not yet been worked out and that the pack­age will not in­clude the re­struc­tur­ing of Greek debt.

“It is in process, there is no fi­nal num­ber at this point in time,” she told re­porters.

“No,” La­garde re­sponded to a ques­tion on whether she ex­pects Greek debt to be re­struc­tured.

While the gov­ern­ment strug­gles to pre­vent Greece from de­fault­ing on its debt, the So­cial­ist Cabi­net has been de­bat­ing a midterm eco­nomic plan which will im­pose 6.4 bil­lion eu­ros of ex­tra sav­ings in the rest of this year alone.

The Greek gov­ern­ment ex­pects Par­lia­ment to vote on its midterm aus­ter­ity plan by the end of June.

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