By V. Kostoulas
[email protected]
The IMF's executive board this week may have confirmed differences with European creditors over the Greek program, but it nonetheless described the formula for overcoming obstacles, something that has shifted the pressure to the Greek side to meet its pre-existing commitments.
As previous reports have noted over the recent period, the Fund on Monday officially disclosed that it considers the Greek debt as unsustainable, whereby immediate debt relief measures should be spelled out -- even if their implementation comes at a later date.
The "tug-of-war" leaves crisis-battered Greece in the middle: as long as Eurozone countries delay in specifying medium-term debt relief measures for Athens, the longer the IMF will take in returning to the bailout as a creditor, although it still retains a role in the program. The last time the IMF funneled a loan tranche to Athens was in 2014.
According to the Fund's "calculus", its lower forecasts for Greek GDP growth in the medium-term render a 3.5-percent primary budget surplus target, as a percentage of GDP, after 2018 as unrealistic. The ambitious fiscal targets are a demand by European creditors.
Conversely, the IMF proposes a primary budget surplus target of 1.5 percent of GDP.
Nevertheless, the IMF's technocrats have repeatedly said the Fund could accept the higher fiscal targets -- which the Greek government initially signed but then tried to downplay -- if "precautionary measures" were legislated. The extra austerity measures would render the targets as more realistic, according to the IMF's reasoning.
Such as compromise would go a long way towards bridging the current differences between the IMF and Europeans, and essentially make the process of concluding the now delayed second review of the Greek program easier.
Based on a such a looming compromise -- one that also meets Berlin's strict conditions -- the message by creditors to Athens is that "the ball is in your court".
As "N" has repeatedly reported, "precautionary measures" include a reduction in the annual tax-free income threshold to expand the tax base; another reduction in state outlays for social security expenditures, given that Greece has the highest percentage of spending, compared to GDP, for social security in the EU; as well as a liberalization in the labor market, such as allowing mass layoffs without the relevant minister's approval in order for troubled firms to restructure.
