Athens rejects IMF projections
Fund report disputes growth targets and long-term sustainability of the debt, while calling for pension cuts
The government has clearly expressed its disagreement with certain conclusions reached by the International Monetary Fund, which has expressed reservations about Greece’s growth prospects in a report.
The IMF’s Article 4 report on Greece’s economic progress was discussed yesterday at the Fund’s executive board meeting, with Greek growth seen at around 2 percent both this year and next, and questions raised over the long-term sustainability of Greece’s debt.
The report may acknowledge the new government’s promising start after the removal of obstacles to reforms and privatizations, but it also stresses the need for a greater effort to improve the country’s competitiveness and accelerate the growth rate.
In response to the report, Greece’s representative at the Fund, Michalis
Psalidopoulos, issued a statement, attached as is customary to the report, contradicting a series of arguments by the IMF economists that downgrade the Greek economy’s prospects.
The Fund projects a long-term annual growth rate of just 0.9 percent, on which it bases its assumption it will take a decade and a half for the real per capital gross domestic product to revert to pre-crisis levels. It also expresses doubts as to the sustainability of the national debt after 2032. The report notes that the debt’s long-term sustainability is not certain under realistic macroeconomic assumptions.
The report, expected to be released by tomorrow, reiterates the IMF’s positions in favor of reductions to pensions and the tax-free threshold, which Athens has regressed on. While accepting that the tax cuts are positive, it notes that more must be done to expand the tax base. It specifically calls for the abolition of the annual handout known in Greece as the “13th pension,” which this government has also voted for.
The IMF report will be followed next Wednesday by the – much more significant – European Commission report on the fourth post-bailout assessment, which will pave the way for the approval by the Eurogroup on December 4 of the disbursement to Athens of earnings of eurozone central bank earnings from Greek bond holdings totaling 600 million euros.