Warnings from the IMF and the eurozone


European Stability Mechanism Managing Director Klaus Regling

TAGS: Finance

The government received a number of warnings on Wednesday about its conduct and the Greek economy, one day after the International Monetary Fund suggested that the latter could grow 2.8 percent next year.

The IMF issued a new report onb Wednesday containing fiscal estimates for its member-states, in which it sees the Greek primary surplus coming to just 0.1 percent of gross domestic product this year, against a government forecast of 0.6 percent. For 2017 the Fund expects the primary surplus to reach 0.7 percent of GDP against 1.8 percent that the draft budget provides for. Crucially, it said that the primary surplus will not exceed 1.6 percent in the years from 2018 to 2021, while the European Commission envisages a mean rate of 3.5 percent in the same period.

The IMF further warns that these figures will only materialize if the fiscal policy agreed on in the context of the bailout agreement is fully implemented. However, these figures are unlikely to make the Greek debt sustainable without an intervention – i.e. a debt lightening arrangement. Therefore, the Fund is putting extra pressure on the eurozone to act on the issue.

In this context, the Finance Ministry’s administration is as of Thursday in Washington in a bid to support Greece’s position in the context of the IMF’s annual meeting.

Meanwhile, Reuters reported an IMF official as saying that Greek banks currently have adequate capital but warning that they need to pursue restructuring to ensure that this capital adequacy continues.

Also on Wednesday the managing director of the European Stability Mechanism (ESM), Klaus Regling, told Bloomberg that while progress is being recorded in Greece, “the program is not fully supported by everyone in the Greek government,” and that beyond the prime minister, “there is no full ownership of the program,” before saying Athens must stick to the bailout agreement.

He was particularly critical of ruling SYRIZA, saying that it tried to backtrack and apply new strategies to bring the country out of crisis that “did not succeed and Greece has returned to recession.”