ECONOMY

IMF wants speedy action on deficits

The International Monetary Fund sees Greece’s economy shrinking by around 1 percent this year to be followed by a number of years of weak growth if nothing is done to reduce its large budget shortfall and current account deficit. A team of IMF officials are currently in Athens and met yesterday with representatives of the Economy and Finance Ministry and private sector union group the General Confederation of Greek Workers in order to assess the state of the economy, which has started to really feel the pinch of the global crisis. By the end of the week, IMF officials are expected to also meet with officials from the General Accounting Office, the Bank of Greece and Economy and Finance Minister Yiannis Papathanassiou. IMF concerns center on the deficits in the budget and the current account figures, reflecting the country’s eroding competitiveness and harming Greece’s growth potential. The IMF is likely to recommend drastic cuts to public expenses in order to speed up the reduction of the budget deficit as well as call for bolder reforms, a source said. Greece’s budget deficit is seen as widening in 2009 to 5.1 percent of gross domestic product from 5 percent in 2008 as slower economic growth weighs on revenue collection, according to a European Commission report released last week. Brussels expects the Greek economy to contract by an annual pace of 0.90 percent in 2009. Meanwhile, Alpha Bank said in a weekly report released yesterday that if no additional measures are taken to help support revenue growth and cut expenditures, Greece’s budget deficit may reach about 5.5 percent of GDP in 2009, versus the government’s 3.7 percent target. «If this happens, then reducing the deficit to 3 percent by 2010 and zero by 2012… will have a larger development and social cost than it would have had the deficit been reduced in 2009,» the report said.