Daily Management Review

Lower Fiscal Surplus Target Should be Met by Greece, says the IMF


02/07/2017




Lower Fiscal Surplus Target Should be Met by Greece, says the IMF
Greece should meet the fiscal surplus target preferred by most IMF directors which will help its economy to grow by just under 1.0 percent in the long run given the constraints of its bailout program, the International Monetary Fund said on Monday while talking about the future of this European Union member.
 
While some directors favor the higher 3.5 percent target sought by Greece's European lender group, most of its board directors favor a Greek fiscal surplus target of 1.5 percent of gross domestic product by 2018, the IMF said in its annual review of Greece's economic policies.
 
How many of its 24-member board shared that view or which directors favored the higher target were not identified by the Fund.
 
As the IMF considers whether to participate in a new bailout for Greece needed by mid-2018, the rare split among IMF's directors reveals some divisions in their views of Greece's fiscal performance and debt sustainability.
 
The IMF remains actively engaged in negotiations on a new deal to start in mid-2018 but has abstained from financial involvement in Greece's third bailout from European lenders since 2010.
 
Any massive debt relief or further austerity measures would hurt growth in Greece and a Greek fiscal surplus target of 3.5 percent of GDP is too ambitious, argued IMF Managing Director Christine Lagarde and other senior officials.
 
Germany is strongly against any discussion of debt relief before Greece reaches the bailout target and the country, which contributes the most to Greece's bailout, faces national elections in September.
 
The issue of whether the Fund would commit financial resources to Greece was not addressed by the IMF review. Austerity measures and reforms have "taken a heavy toll on society that, together with high poverty and unemployment rates, has contributed to a slowdown in the reform implementation," the directors of the agency recognized, said the Fund in a statement.
 
"Most directors agreed that Greece does not require further fiscal consolidation at this time, given the impressive adjustment to date."
 
Rationalization of pension spending to make room for lower tax rates and more aid to the poor and the broadening of the personal income tax base in Greece were called for by the directors, despite the divisions over the fiscal target, the IMF said.
 
The head of Greece's bailout fund said last week that a further slice of aid could only be granted once the IMF decides to formally join the program and Greece is expected to need a new tranche of aid under the current 86 billion euro ($92 billion) program by the third quarter of this year.
 
A decision by the IMF to pull out of the bailout would mean that the current program would end as well, believes Germany's Finance Minister Wolfgang Schaeuble.
 
(Source:www.reuters.com)






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