IMF points to new mea­sures

Report fore­casts that 2018 pri­mary sur­plus will be sig­nif­i­cantly lower than draft bud­get pre­dic­tions

Kathimerini English - - Front Page -

The third re­view of Greece’s third bailout could hit a snag after the In­ter­na­tional Mone­tary Fund’s forecast yes­ter­day that the coun­try’s pri­mary sur­plus in 2018 will be at 2.2 per­cent of gross do­mes­tic prod­uct – sig­nif­i­cantly lower than the 3.5 per­cent pre­dicted by European in­si­ti­tu­tions and stip­u­lated in the gov­ern­ment’s draft bud­get and the bailout agree­ment

The lat­est forecast in­cluded in the IMF’s Fis­cal Mon­i­tor report re­leased yes­ter­day could, an­a­lysts be­lieve, be a source of mis­ery not just for Athens, which may once again be forced to look down the bar­rel of fresh mea­sures next year to the tune of 2.3 bil­lion eu­ros – 1.3 per­cent of GDP – but for its European Union part­ners as well, who will have to de­cide whether to go along with the IMF’s forecast or not.

If they do not, then the risk of the IMF leav­ing the Greek pro­gram will be higher.

If, how­ever, European lenders go along with IMF’s forecast, which it first made in July, then Athens is con­cerned that they may re­vise their own pre­dic­tions down­ward in or­der to pla­cate the Washington-based or­ga­ni­za­tion – as was the case dur­ing the sec­ond re­view – in or­der to en­sure that it re­mains on board with the Greek pro­gram.

The lat­ter out­come could, an­a­lysts reckon, be the more likely one given that Ger­many’s Free Democrats (FDP), ex­pected to form part of Chan­cel­lor An­gela Merkel’s gov­ern­ing coali­tion, have stated that they will agree to an aid pro­gram for Greece on the con­di­tion that the IMF takes part in the Greek bailout.

As part of the sec­ond re­view, the left­ist-led gov­ern­ment had agreed to im­ple­ment mea­sures in 2019 and 2020, but not in 2018 cit­ing the ex­is­tence of the au­to­matic fis­cal mech­a­nism known as the “cut­ter,” which will be ac­ti­vated if Greece fails to meet its fis­cal tar­gets.

If the IMF does not re­vise its as­sess­ment then it is highly likely that the cut­ter will be ac­ti­vated.

In any case, an­a­lysts say that the third re­view will most likely run into trou­ble as a re­sult of yes­ter­day’s report by the IMF which also said in July that the need may arise to ex­pe­dite al­ready agreed cuts in pen­sions and re­duc­tions in the in­come tax thresh­old.

More­over, it also rec­om­mended the sus­pen­sion of the gov­ern­ment’s planned counter mea­sures to off­set aus­ter­ity un­til 2023.

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