ECONOMY

IMF: First reforms, then debt cut

imf-first-reforms-then-debt-cut

The International Monetary Fund on Thursday linked the reforms in Greece with the lightening of the country’s debt, with spokesman Gerry Rice asking Athens to proceed with changes to the social security and the tax system.

Rice commented that negotiations between the creditors and the government took place last week in a constructive mood and added that no change can be expected in the IMF’s policy regarding the Greek program. However, he stopped short of announcing a date for the creditors’ return to Athens, saying that this will depend on the progress Greece makes.

The IMF spokesman also stated that the Fund’s position is that Greece requires a realistic and balanced program which will include brave reforms on the one hand and a generous reduction of the national debt on the other. This was also the message that Managing Director Christine Lagarde had sent a few days earlier.

Rice stressed the need for the reform of the tax system so that Greeks pay in proportion to their real potential and the burden is not passed on to weaker groups. He remarked further that it is for similar reasons that the reform of the social security system must also proceed and said that “a limited social security reform will require a greater reduction of the public debt.” He made it clear that the IMF is not in favor of a tougher fiscal adjustment.

Regarding the banking sector, Rice noted that the Greek lenders’ fundamentals have been strengthened thanks to the recent recapitalization. He also commented on the decline in bank stock prices, highlighting the international market turmoil on top of the climate of uncertainty within Greece.

Rice made sure to stress the significance of Greek banks dealing with the issue of nonperforming loans so as to strengthen their positions further and contribute to the recovery of the Greek economy. This, after all, is one of the topics that will secure plenty of interest during the negotiations between Athens and its creditors for the first review of the bailout program.