BUSINESS

IMF fears reversal of reforms

EIRINI CHRYSOLORA

TAGS: Finance

The International Monetary Fund on Friday expressed uncertainty over the long-term prospects of Greece’s debt, along with concern that some of the reforms might be reversed or not implemented, including the reduction of pensions in 2019 and the tax discount in 2020.

After wrapping up an inspection in Athens in the context of drafting the Article IV report, mission chief Peter Dolman stated at a press conference that the implementation of those two reforms is crucial as it will signal whether the government will remain on the path of reform or not in the post-program period.

Despite recent statements by government officials – including the prime minister – regarding the possibility of avoiding the pension cut, Dolman stressed that Athens has been “very firm” in committing to doing what has been agreed to in 2019 and 2020. He added that because the Fund’s role is only of an advisory nature, it is not competent to allow or ban the implementation of any measure.

In its report the IMF warns that any delay in those reforms would greatly undermine the credibility of the debt-easing measures’ scenarios as agreed with the eurozone. It adds that the authorities will need to be careful about the adoption of any permanent measures beyond those already legislated, so as to avoid putting the fiscal targets at risk.

The IMF mission also warned the government about the risks of its plans concerning the labor issues and the minimum salary. “Legislation reintroducing the possibility of extension and the more favorable terms of the collective contracts starting from later this year” risks canceling the progress made on this front, the mission statement warns, before going on to recommend that Athens does not reverse these reforms. “Any adjustment of the minimum salary will have to be wise and in harmony with benefits in competitiveness to retain the momentum for the restoration of employment and avoid any loss of competitiveness,” the statement added, with Dolman calling on the government to revise its plans.

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