European finance ministers agreed on Tuesday to examine Greece’s case regarding a possible adjustment to its fiscal consolidation program after the International Monetary Fund admitted that it had underestimated the impact that austerity would have on the country’s economy.
Sources said that Greek Finance Minister Yannis Stournaras raised the issue regarding the IMF’s reassessment of the so-called fiscal multipliers at yesterday’s ECOFIN meeting in Brussels and received support from his Portuguese and Irish counterparts. European Economic and Monetary Affairs Commissioner Olli Rehn, however, expressed doubts about the IMF’s calculations and stressed the impact that political instability had on Greece’s economy last year.
The finance ministers decided to study the issue in more detail and discuss it again when they meet next.
Stournaras referred to the issue of the IMF underestimating by as much as three times the Greek program’s fiscal multiplier following Monday’s meeting of eurozone finance ministers. “I will ask the IMF to inform us about the conclusions it draws with regard to Greece from its report about fiscal multipliers,” he said.
IMF managing director Christine Lagarde was at the Eurogroup meeting but did not comment on the subject.
Speaking to Skai TV’s New Files program, Klaus Regling, the managing director of the European Stability Mechanism (ESM) played down the importance of the IMF’s miscalculation.
“I do not totally agree with the IMF’s analysis on fiscal multipliers,» he said. «We believe there is a problem with the data they present. There were serious reasons for the multipliers being bigger but this is not the main issue.”
Regling said that when the program was drawn up, Greece’s situation was so dire that the size of the fiscal multipliers were of secondary importance.
It is thought Greek government officials will take up the issue with troika representatives who are due to visit Athens at the end of this month. Sources said the coalition is hoping to convince Greece’s lenders to allow the easing of value added tax at restaurants and cafes to be reduced from 23 percent to 19. This is seen by Athens as an initial concession following the revelations about fiscal multipliers.
In the meantime, the government faces a pressing task in keeping the National Organization for Healthcare Provision (EOPYY) afloat.
Prime Minister Antonis Samaras held meetings with Health Ministry officials on Tuesday amid fears that a lack of liquidity could prevent EOPYY from functioning. It was agreed that about 750 million euros of the 2 billion the government has at its disposal would be used to settle some of EOPYY’s debts, including those to pharmacies and suppliers, by the end of March.