IMF insists on cuts, tax-free threshold

Report raises fresh doubts about long-term sustainability of Greek debt without another restructuring

The International Monetary Fund remains unchanged in its views regarding the need for Greece to slash pensions, abolish pensioner handouts and reduce the tax-free threshold, and insists that the national debt is unsustainable in the long term, according to the Fund’s latest report on Greece.

The Article IV report will be discussed by the IMF executive board on November 13, in the wake of the Fund’s mission to Athens in September. However, its completed text has been on the desks of the board members, as well as those of the Greek government, since last week.

On the debt’s sustainability, the Fund’s analysis does not foresee any problem in covering funding needs up to 2032; however, after that the coverage of needs will depend on interest rates and the growth of the economy, which the IMF itself projects at just 0.9 percent.

As things stand (with low interest rates), covering funding needs up until 2038 should not be difficult, while if in 2032 the eurozone creditors decide on a further restructuring of the Greek debt, its sustainability will be secured up until 2050.

The extensive text is along the lines of the IMF mission’s conclusions on September 27, criticizing the reversal of reforms agreed in the context of the third bailout agreement after the country exited the program in August 2018. The report further criticizes measures such as the protection of mortgages and the restructuring of debts to the tax authorities and social security funds, arguing that they undermine the payment culture and should be scrapped. As for the regulation to protect borrowers’ primary residences, it stresses this is the ninth in a row on the same matter.

The report gives the new government a provisionally positive reception, praising its policy on privatizations and reforms, although it is not very optimistic in its growth forecasts. It estimates that the economy will expand 2 percent this year and 2.2 percent in 2020.

The IMF is therefore close in its estimates to those of the European Commission, which recently put growth at 1.9 percent in 2019 and 2.3 percent next year.