BUSINESS

IMF points to more austerity measures

SOTIRIS NIKAS

TAGS: Finance

The International Monetary Fund issued a clear message on Thursday that Athens must take new, tough measures to achieve a primary surplus target of 3.5 percent of gross domestic product in 2018, which sources say add up to 4.3 billion euros. This was after Finance Minister Euclid Tsakalotos told Parliament the difference with the eurozone amounts to 150 million euros and with the IMF to 250 million.

The issue of the number of years which Greece will need to maintain a primary surplus of 3.5 percent of GDP after 2018 also remains unresolved.

Sources say that in terms of the fiscal forecasts, the differences between Athens and the country’s creditors as well as among the creditors themselves are currently much greater than generally thought. The representatives of the creditors will return to Athens early next week without necessarily having reached an agreement between them on the new measures they will ask the Greek government to take.

A few hours after Tsakalotos said the difference between Athens and its creditors on the fiscal front was minimal, saying, “I do not think this would be a problem,” IMF spokesman Gerry Rice said if Athens and the eurozone insist on a 3.5 percent primary surplus target, then new measures of “high quality and credibility” will be required.

Rice stated: “We prefer [a target of] 1.5 percent of GDP as this means smaller austerity. [A target of] 3.5 percent includes more austerity, but if this is the decision of Athens and Europe our job is to ensure there are the reforms and the measures to achieve that.”

According to sources, the IMF believes the existing measures will see Greece reach a primary surplus of 1.1 percent of GDP in 2018. To meet the target of 3.5 percent, new measures of 2.4 percent of GDP, or 4.3 billion euros, will be required, so, in this context, the IMF wants a reduction in pensions and the tax-free threshold.

Athens insists that this is not an option and points to the automatic mechanism that contains expenditure that can correct any problems in the achievement of the fiscal targets.

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