Greek crisis could erupt again as eurozone is too unrealistic, IMF warns

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The Express — Strict bailout demands imposed by eurozone ministers and Athens are forcing Greece to strive for a primary budget surplus of 3.5 per cent.

The demands are for greater tax revenues than Government spending and it means Greece is facing calls for harsh austerity, which could damage the country more in the long run.

Gerry Rice, director at the IMF communications department, said: “We continue to believe a medium and long-term primary surplus target of 1.5 percent of GDP is appropriate for Greece and can be attained through the measures currently included in the ESM program.

“So we’ve said this before – and say it again- the IMF is not asking for additional austerity, and we could support a program based on a target of 1.5 percent of GDP. That is our preferred option.”

He insisted it would “mean less austerity for Greece and the Greek people”, adding: “We would like to see debt relief that is commensurate with that. And we need two legs; we need the combination.”

The stricken Mediterranean country is one of the biggest threats to the future of the euro despite seven years of gruelling recession and austerity imposed from Berlin and Brussels.

Athens has one of the highest debt and unemployment rates in the world and has become a simmering hotbed of anti-EU feeling.

Its crumbling position has raised fears the country could still collapse, dragging the euro currency down with it.

Demands from the EU and Germany have elicited a furious backlash from ordinary Greeks, who have seen public services and employment opportunities slashed.

However Mr Rice said the IMF would have to “support” Europe’s higher demands for primary surplus as long as it is “underpinned by credible and high quality structural reforms”.

He added: “If the decision of the Greek government and the European authorities is to go forward with the higher primary surplus target, 3.5 percent, then it’s our job as the IMF to ensure that the reforms and the measures that can get you to the 3.5 are there.

“We continue to remain fully engaged in the policy discussions on Greece with the Greek authorities and the European institutions.

“And in fact, I can tell you those discussions continue to take place on a daily basis, via teleconference at the moment.”