IMF fears fiscal impact of polls


With polls looming this year, the International Monetary Fund has expressed concern that government policy could be dictated by pre-election considerations which could lead Greece away from the path of fiscal discipline and reform.

“We are concerned about the pressures that elections will have on policy,” said the head of the IMF mission in Greece, Peter Dolman, during the presentation Tuesday of the Washington-based Fund’s first report since the country exited its third bailout program.

Tellingly, Dolman cited the legal framework that will replace the so-called Katseli law for the protection of debtors’ primary residences, clarifying that the IMF is opposed to the broadening of its scope and, like the eurozone, believes it will have a negative impact on Greece’s payment culture.

In its report, the IMF noted that the country’s economic recovery is continuing but warned that the reform momentum is slowing and downside risks are rising.

“To maintain its hard-earned competitiveness and boost medium-term prospects, Greece should press ahead with its unfinished reform agenda,” it said.

The report warned of fiscal risks that “might possibly arise from court rulings on past wage and pension reforms.” It also said that the business environment is poor, “given an unfinished structural reform agenda and labor market reversals.”

“Downside risks, not least from legal challenges to past fiscal measures, recent labor market policy decisions, and election uncertainty have increased,” it said.

The report said that tax compliance and debt collection indicators are improving but remain well below advanced country standards. It also expressed concern over the government’s recent reversal of the 2012 collective bargaining agreement, which was “followed by a statutory minimum wage hike of nearly 11 percent in early 2019 – well above productivity growth.”

The Greek banking sector, it said, remains vulnerable as “[nonperforming exposures] remain high, and the quality of the performing loan book is uncertain due to borrowers’ stretched balance sheets, the high share of variable interest rate loans, and a weak payment culture.”