IMF frets over civil servants
Fund officials praise reaction to the pandemic, but warn on state workers, pensions and NPLs
The International Monetary Fund is happy to encourage the extension of fiscal relaxation into 2022 to support recovery in Greece, and perceives some improvement in the long-term sustainability of the national debt; however, it has strong concerns about local banks regarding the quality of their capital and has issued a warning about an increase in the number of state workers, which looks like it might be returning to pre-crisis levels.
That was the feedback the Fund offered Finance Ministry officials in their recent contacts, in the context of the scheduled monitoring of the Greek economy. The IMF is now much more lenient toward Greece, not only because it acknowledges past errors in its assessments and because the pandemic has forced it to ease its strict policies, but also due to the major reduction in Greece’s dues to the Fund, down to just 1.8 billion euros.
The IMF officials appeared satisfied with Greece’s swift reaction to the pandemic that safeguarded jobs, saying it was among the biggest interventions in the eurozone.
Now, they added, Athens needs a smooth transition from the support measures to the investments of the Next Generation EU fund so as not to put the economic rebound at risk in the name of fiscal stabilization. They did warn, however, that the resources secured thanks to the fiscal relaxation must be used in the proper way.
That, according to what the IMF officials told the government, may include the tax breaks, tax rate cuts and tax deposit reduction decided, but it should also incorporate interventions and expenditure, with a further increase in the minimum guaranteed income and healthcare spending.
To offset that expenditure, the IMF experts spoke in favor of savings from other sectors where there is scope for that, but they also see the risk of succumbing again to past mistakes: They therefore warned that the number of state workers is climbing back up to levels last seen before the debt crisis, and called for savings from pension spending. They are also worried about the course of bad-loan reductions.
