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IMF to Greek FinMin: Level of primary budget surpluses a matter between Athens, European creditors

Greek Finance Minister Euclid Tsakalotos presented Athens’ standing arguments in favor of suspending an already legislated round of pension cuts to the IMF’s leadership on Friday, with the Washington D.C.-based Fund continuing to toe the strictest line vis-a-vis the post-bailout conditions applying to thrice bailed-out Greece.

According to reports from far-off Bali, Indonesia, IMF Managing Director Christine Lagarde and the Fund’s European Department director, Poul Thomsen, reiterated that the level of the primary budget surplus, as a percentage of GDP, that the Greek state will post is primarily a matter between Athens and its European creditors/partners.

Meeting and, in fact, exceeding the annual fiscal target of a 3.5-percent primary budget surplus has been the leftist-rightist coalition government’s main “trump card” in trying to persuade creditors that the pending social security cuts are unnecessary and actually inhibit economic growth.

Tsakalotos is in Indonesia for the IMF annual summit, where he met separately with Lagarde and Thomsen, an IMF “old hand” in two out of three bailouts extended to Greece since 2010.

The subsequent “spin” out of Athens and the finance ministry is that both IMF executives listened to the Greek side’s arguments “with interest”, namely, that another round of pension cuts is not a structural reform, and that enough “fiscal space” exists in the budget to implement several countervailing measures (spending hikes, tax cuts) over a four-year period.