Reuters — Greece needs substantial relief to render its debt sustainable and help set its ailing economy on a recovery path, the International Monetary Fund said in an annual review on Friday.
The report accepts that Greece has made significant progress in unwinding its macro-economic imbalances, but economic growth will remain weak and subject to high downside risks, and unemployment will likely stay in the double digits until the middle of the century.
Greece continues to need deep reforms, including to its labour and product markets, to bolster the economy’s resilience, the IMF said. At the same time, European creditors need to provide more debt relief than what’s being considered, it said. Greece’s fiscal targets are unrealistic, including a goal for 3.5 percent primary surpluses for many decades, the fund said.
The nation needs to cut payments for existing pensioners in order to redirect welfare spending to socially vulnerable groups, Velculescu said. The labour market reforms carried out over the past few years shouldn’t be reversed, she added.
“We are not advocating for more austerity,” Velculescu said. “We are advocating for less.”
Velculescu said talks are ongoing on a possible new IMF loan.
“We are expecting to have a program with Greece, but we need both legs of the program,” Velculescu said, referring to the need for reforms and debt relief.
“The authorities’ current targets remain unrealistic, in that they still assume that Greece will attain and sustain primary surpluses of 3.5 percent of GDP for many decades despite double-digit unemployment rates,” the IMF review said.
“It cannot be assumed that Greece can simply grow out of its debt problem. Further debt relief will be required to restore sustainability.”
Athens welcomed the IMF’s view that significant debt relief was needed.
