IMF issues mixed report for Greek economy; calls social security deficit unsustainable

The IMF on Friday released the main conclusions of its review of the Greek economy, noting that the country has posted “significant progress” in resolving what the Fund called macroeconomic imbalances. However, the reported stressed that economic growth has still not returned and that risks remain great.

The report, composed by an IMF delegation that held contacts with the Greek government over the past week and immediately after negotiations between creditors’ representatives -- including the IMF -- and the Greek side, was the first of its kind since 2013. The report was more-or-less expected and fulfilled a provision in its charter to monitor the economies of beneficiary countries.

Another main conclusion in the report reiterated that crisis-plagued Greece must implemented “deep reforms”, an IMF leitmotif since the beginning of the unprecedented crisis that caused the Greek economy to implode since 2009. Such reforms, according to the IMF, are needed in order to strengthen the Greek economy within the unified monetary system, the Eurozone, without the need for the long-term assistance of its European partners.   

In terms of Athens’ closely watched fiscal policy, given that memorandum-mandated targets foresee ambitious primary budget surpluses through 2018, the IMF called for improvements towards a more balanced mix of policies, ones it maintained must be “friendlier” towards growth.

The fund also said that recent reforms in Greece’s bloated social security system aim to cut outlays for the sector amounting to 1 percent of GDP, over the medium-term. Nevertheless, while praising the measures, the Fund noted that the current deficit in the country’s social security system is unsustainable, given that social security benefits of all types in the country equal 10 percent of GDP – in comparison with 2.5 percent in the rest of the Eurozone.