ECONOMY

Tough steps needed for recovery

The International Monetary Fund will call on the government to implement tough economic measures after next month’s European parliamentary elections in order to help the economy recover from the global crisis. The IMF team currently in Athens will wind up its meetings today with officials from the Economy and Finance Ministry, Bank of Greece, National Statistical Service and Public Debt Management Agency and will make recommendations in two areas: to move ahead with budgetary reforms and improve the economy’s competitiveness. IMF officials are concerned that fiscal targets are at risk due to the upcoming elections, as it has called for greater spending discipline rather than upping taxes to support revenues. As regards Greece’s eroding competitiveness, IMF officials consider it necessary to freeze worker pay hikes for a number of years so that they do not exceed productivity levels. The two-year wage agreement in the private sector is seen as being particularly high, according to a source. Earlier this week, a report showed that Greece has fallen 10 places since last year on a world competitiveness report for the year 2009, ranking in one of the lowest positions by an EU country, due to its lack of reforms and poor results on the macroeconomic front. The IMF expects the Greek economy to contract by an annual rate of up to 1 percent this year and the budget deficit to widen to 6 percent of gross domestic product. Additionally, the IMF judged government efforts to boost demand in the economy, such as the introduction of a 50 percent cut in the registration tax paid on new cars and motorcycles, as missing the mark. The only positive finding in their review of the Greek economy is that the country’s banking sector successfully passed its strict stress tests.