IMF Applauds “Exceptional” Greek Deficit Reduction

Greece has had to ask its Eurozone partners for two bailouts in order to help the nation avoid bankruptcy and an inevitable exit from the single European currency. These loans were both made with a contribution from the International Monetary Fund (IMF) and came with strings attached which the EU and the IMF believed would ensure the long term stability and viability of the Greek economy. In total, the loans amounted to €240 billion which equates to approximately 124% of Greece’s gross domestic product.

In a recent report, the IMF notes that Greece has made “exceptional” progress in reducing its deficit since the first of the loans was agreed in May 2010. It noted that “insufficient structural reforms have meant that deficit cutting has been achieved primarily through cutting jobs and salaries bringing unequal distribution of
the burden of adjustment”. It says that Greece must do more to tackle the problem of tax evasion which remains a major issue. Sectors of the rich and self-employed are not paying their share of taxes, meaning that the impact of austerity measures hits public sector workers and pensioners disproportionately hard.

Greece still needs to shed further public sector jobs with up to 150000 facing the axe between 2010 and 2015 – roughly a reduction of one in five posts. The IMF report urges Greece to overcome its “taboo against mandatory dismissals” – a step
was taken in this respect last month when parliament adopted a bill which permitted the dismissal of 15000 civil servants. Unemployment stands at 27.2% of the workforce, so further reductions will be very unpopular.

The IMF is forecasting that the Greek economy will contract by 4.6% this year, but the EU is predicting that the nation will return to growth next year with a projection of a positive GDP of 0.6%, in line with the IMF’s own projections.