IMF calls for new measures next year

Greece will need to adopt new austerity measures to the tune of 6.7 billion euros from 2014 to 2016 in order to make its fiscal adjustment targets, the International Monetary Fund warned on Wednesday. This is 2.6 billion euros more than foreseen in the agreement between Athens and its creditors for additional interventions in the 2015-2016 period, as there was no provision for new measures next year.

The IMF report on international fiscal progress said that Greece’s further adjustment up to 2016 “will require additional measures, including the profits from tax administration equal to 3.5 percent of gross domestic product,” which in absolute figures amounts to 6.7 billion euros.

The Finance Ministry issued a statement on Wednesday evening in which it avoided making a direct comment on the report, but said that it also made no comment when the IMF had adopted “erroneous statements and assessments in drafting the original Economic Policy Program for our country.”

The IMF further reiterated its view that an additional haircut in the official sector is required for the Greek debt to drop below 124 percent of GDP by 2020.

Likewise, the State Budget Office of the Greek Parliament issued a report ion Wednesday on the course of the public debt, saying that “a new loan agreement for the bridging of the fiscal gap would only offer a temporary solution for one or two years.” It added that the debt “will not enter a reduction course and become sustainable by 2022 exclusively with national saving efforts.

“It is an illusion to expect that the country will return to the markets after 2014 to cover on normal terms the needs for the refinancing of the debt plus any extraordinary requirements. The debt arithmetics are against us,” it said.

The report went on to recommend that “the write-off of part of the debt by the the European Union and the eurozone would create a new situation.”

The managing director of the European Stability Mechanism, Klaus Regling added on Wednesday that once the current program ends in mid-2014 Greece will need more help from its friends. He denied any talk of a 50-year bond, noting that the maturing of Greece’s debt through the ESM is already at 30 years.

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