ANA-MPA — Greece needs significant pension reforms to make the system sustainable but this must be accompanied by debt relief from its European partners, International Monetary Fund (IMF) Managing Director Christine Lagarde said on Thursday.
“I have always said that the Greek programme has to walk on two legs: one leg is the one of significant reforms and the other one is a debt relief. We persist on that view if the pension reform cannot be as significantly, substantially deeply reformed as needed, it will mean more debt relief on the other side,” she said.
But equally, Lagarde pointed out, no amount of debt relief will actually make the pension system sustainable. Greece would currently have to devote 10 per cent of GDP in its annual budget to keep the pension system afloat and this was not sustainable, she added.
“The average in Europe is 2.5 per cent of GDP,” stated Lagarde. “So it all needs to add up but at the same time the Greek pension system needs to be sustainable in the medium- and long-term, and that requires taking short term measures now that will last in order to make it sustainable.”
Lagarde also denied that the IMF was pushing for “draconian” measures in Greece.
“We have said all along that the fiscal consolidation should not be excessive, so that the economy could continue to work and eventually expand, but it needs to add up,” added the IMF chief.
“The pension system needs to be reformed, the tax collection system needs to be improved so that revenue comes in, tax evasion is stopped, and the debt relief by the other European must accompany that process.
“For this reason, the IMF will be very attentive to the sustainability of the reforms.
“We want that country to succeed at the end of the day, but it has to succeed in real life, not on paper,” concluded Lagarde.
