By Sotiris Nikas
Greece needs to break the taboo of dismissing civil servants, the representative of the International Monetary Fund to Greece, Poul Thomsen, warned in Athens on Wednesday, adding that the budget deficit will likely come to 10 percent while the economy will contract by at least 6 percent this year.
He said in clear terms that the government will now have to move ahead more aggressively with the closure of public bodies and to “non-voluntary departures” of staff, while underscoring that the immediate implementation of reforms is absolutely vital from now on.
Addressing an Economist conference, Thomsen stressed Greece had been warned that without reforms to the public sector its deficit could not be brought below 10 percent of gross domestic product.
The IMF official went on to admit that the creditors’ memorandum with the government has failed in many respects, but attributed this failure to the fact that Athens did not stick to the agreed reform timetable.
“There is no more room for across-the-board expenditure cuts in wages and pensions. Greece needs to move more aggressively in closing down redundant state enterprises and may have to accept redundancies. I cannot see how Greece can tackle fiscal problems without addressing these taboos,” Thomsen stated.
He also called for the promotion of more structural reforms and for greater flexibility in labor relations, highlighting the problem of the high salaries in infrastructure corporations that used to fully belong to the state, such as listed firms Public Power Corporation (PPC) and the Athens Water and Sewage Company (EYDAP), among others.
Thomsen further blamed the lack of political will for adequate progress, owing to a number of interests.
The head of the European Commission’s task Force to Greece, Horst Reichenbach, added on Wednesday that the unitary labor cost may have declined this year compared to last, but a greater reduction is needed for Greece to become more competitive - which means that private sector salaries are likely to suffer fresh cuts.