IMF’s mixed report on Greece feeds into political row about economic recovery

The government was accused on Monday of trying to cover up the dire state of Greece’s economy through positive spin as an International Monetary Fund report praised the country for progress in terms of public finances and competitiveness but stressed the need for more structural reforms.

Writing at the end of a review of the Greek fiscal adjustment program, IMF staff said that Greece’s consolidation had been “exceptional by any international comparison” and that the country had achieved “a significant dent in its competitiveness gap.”

However, they also highlighted the slow pace of change in terms of tax collection and the public administration. “Very little progress has been made in tackling Greece’s notorious tax evasion,” the IMF said in a statement on Monday. “The rich and self-employed are simply not paying their fair share.”

The officials added that labor market reforms had “only to a very limited degree been reflected in lower prices” due to barriers to competition. They also said that “the over-staffed public sector has been spared [job losses], because of a taboo against dismissals.”

The Washington-based organization called on the coalition to deliver “deeper political commitment to tax administration reform” and to carry out some “mandatory redundancies” in the civil service rather than relying on “voluntary attrition.”

The IMF said there was “no more room for tax increases or major cuts in discretionary spending.” It also voiced its opposition to “attempts to artificially engineer growth” through development banks, tax-free zones and subsidies targeted at specific sectors. This appears to be contrary to the government’s hopes of reducing value-added tax in the food service sector.

The report identifies Greece public debt as being too high and underlines that its eurozone partners will need to live up to their commitment to provide “additional relief if needed.” So far, the eurozone has not identified what this might be and all talk of an official sector debt restructuring has been rebuffed.

The IMF’s statement was issued a couple of days after Finance Minister Yannis Stournaras told a German newspaper that Greece had overcome the worst of the crisis.

Speaking to the Frankfurter Allgemeine Zeitung, Stournaras said Greece still had “a long road ahead” but that the unity between the three coalition parties was helping the government’s work.

Stournaras also played down the possibility of social unrest as a result of continuing austerity and recession. “There is no way we are close to a social explosion,” he told the paper, adding that the only protests are in the public sector as other Greeks can “see light at the end of the tunnel.”

Stournaras’s interview coincided with Greece receiving from its eurozone partners the 2.8 billion euros cleared after Athens adopted a new round of structural reforms, including 15,000 dismissals in the civil service, last month.

However, his comments were met with derision from main opposition SYRIZA, which accused the government of attempting to gloss over the impact of the crisis.

“These public relations interviews cannot cover up the economic and social reality that the Greek people are living… they cannot make black white,” the leftist party said in a statement on Monday. “The possibility of a recovery is not something that fits within the framework of the [EU-IMF] memorandum.”

An opinion poll published by To Vima weekly on Sunday suggested that Greeks are still skeptical about the country’s prospects. According to the Kapa Research poll, 26.6 percent of Greeks expect to see a recovery in 2020 or earlier, 31.2 percent believe it will come after 2020, while 34 percent do not think it will happen at all. The poll, conducted on a sample of 1,404 respondents, also indicated that 43.7 percent of Greeks are not hopeful and are not making plans for the future.

In its spring estimates for European Union economies published on Friday, the European Commission said it expects Greece’s gross domestic product to fall by 4.2 percent this year, rather than the original forecast of 4.4 percent.