IMF denies it wants more austerity

IMF denies it wants more austerity

As representatives of the country’s international creditors return to Athens Tuesday for a new round of negotiations, the director of the International Monetary Fund’s European Department, Poul Thomsen, and its economic counselor and director of research, Maurice Obstfeld, have denied, in an article they co-authored, that the Washington-based organization is asking Greece for more austerity.

“The IMF is not demanding more austerity. On the contrary, when the Greek government agreed with its European partners in the context of the European Stability Mechanism program to push the Greek economy to a primary fiscal surplus of 3.5 percent by 2018, we warned that this would generate a degree of austerity that could prevent the nascent recovery from taking hold,” they said.

“We projected that the measures in the ESM program will deliver a surplus of only 1.5 percent of gross domestic product, and said this would be enough for us to support a program. We did not call for additional measures to achieve a higher surplus,” they added.

“We have not changed our view that Greece does not need more austerity at this time. Claiming that it is the IMF who is calling for this turns the truth upside down.”

Meanwhile, Delia Velculescu, the head of the IMF mission in Greece, also insisted Monday that the target for a 3.5 budget surplus is far too ambitious and reiterated that the Fund will only enter the Greek bailout program if the country’s debt is made sustainable and tough reforms are implemented.

Tuesday's talks aim to start a process that will lead to a staff level agreement, according to Annika Breidthardt, the spokeswoman of the European Union’s Financial Affairs Commissioner Pierre Moscovici.

What appears almost certain is that the second review of the country’s third bailout will be deferred to 2017 as Athens and lenders remain at loggerheads over fiscal targets and the amount of reforms required.

Greece’s Finance Minister Euclid Tsakalotos hinted Monday that Athens would be willing to be more flexible in order to reach an “honest compromise” with its lenders. He warned, however, that if creditors are not willing to compromise, then that could further strengthen the anti-establishment sentiment that is on the rise in Europe.

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