A closely watched IMF executive board meeting on Feb. 6 -- set to focus directly on the Greek program -- will reportedly reveal the very public disagreements by the Fund's analysts over economic forecasts and figures, mostly quoted by European creditors, concerning crisis-plagued Greece.
By T. Tsiros
[email protected]
A closely watched IMF executive board meeting on Feb. 6 -- set to focus directly on the Greek program -- will reportedly reveal the very public disagreements by the Fund's analysts over economic forecasts and figures, mostly quoted by European creditors, concerning crisis-plagued Greece.
The session, entitled the "2016 Article IV Consultation and Ex-Post Evaluation of Exceptional Access Under the 2012 Extended Arrangement," is the venue for discussion of the report compiled by IMF analysts working under Delia Velculescu, the IMF's mission chief for Greece.
The pending report will come after this week's latest high-profile statements by ESM Managing Director Klaus Regling, who said the Fund's participation as a lender is absolutely necessary in the Greek program.
According to reports, the soon-to-be-released IMF report concludes that the primary budget surplus in Greece for 2016, as a percentage of GDP, will not exceed one percent, despite the leftist Greek government's recent celebratory announcements of a figure of 2 percent of GDP.
Over the long term, the IMF also appears more pessimistic over the course of the Greek economy, compared to European creditors -- something that is clearly stated in the report.
As far as the Greek external debt is concerned, the IMF points directly to an absolute difference in opinions, with the Fund's analysts referring to an extremely "non sustainable" debt.
In delving into the substance of the Fund's major disagreement with European creditors, the IMF analysts reiterate that a 3.5-percent budget surplus target for after 2018 is too high, and will merely require more austerity measures -- something the Tsipras government has repeatedly ruled out -- in order to meet the annual goal.
Nevertheless, more austerity measures will endanger an economic recovery in the country.
Other disagreements confirmed by the IMF include European creditors' lukewarm support for more pension cuts in Greece, which according to the Fund, would shift resources to other social spending. The IMF will also charge that its long-standing demand for the Greek government to expand the tax base in the country by lowering a tax-free threshold, and thereby lowering overall tax rates, is also met with indifference by European creditors.
Finally, the coming report cites three major challenges now facing Athens:
-- a non-viable economic formula, which foresees high pension rates vis-a-vis the capacity of the Greek economy to sustain them, even with stratospheric tax rates imposed on a small tax base; an ineffective tax bureau administration, a lack of a conscientious taxpaying culture and continued arrears owed to the state; along with Greek banks' weakness and deficiencies in the banking sector's top managements.