Greece doesn’t need more austerity, cuts went too far — IMF

WASHINGTON: Greece does not need more austerity at this time, and in fact spending cuts have gone too far already, two senior International Monetary Fund officials said.

If the eurozone country sticks to its agreement with the European Union to increase its budget surplus to 3.5 per cent, contrary to the IMF’s recommendation, then it cannot blame the fund if it must impose more austerity to do so, the officials said in a blog post.

IMF chief economist Maurice Obs t feld, and European Department Director Poul Thomsen, who has been heavily involved with the negotiations with Greece, used the blog to defend the IMF against misinformation they say “turns the truth upside down.”

After days of demonstrations in Greece over new budget cuts, the officials said, “The IMF is being criticized for demanding more fiscal austerity, in particular for making this a condition for urgently needed debt relief.”

But in fact, “The IMF is not demanding more austerity,” they said. “We have not changed our view that Greece does not need more austerity at this time. Claiming that it is the IMF who is calling for this turns the truth upside down.”

On the contrary, the fund warned Greek officials against trying to push for a larger primary surplus – the surplus on the public finances before debt repayments – than the 1.5 per cent the IMF said was achievable.

“But contrary to our advice, the Greek government agreed with the European institutions to temporarily compress spending further if needed to ensure that the surplus would reach 3.5 per cent of GDP” as part of the loan agreement with the European Stability Mechanism, the eurozone’s bailout fund. — AFP