IMF: No change in the Greek program; current austerity measures enough to meet targets

Thursday, 12 October 2017 17:13

By V. Kostoulas

IMF sources pointed directly to paragraph 14 of a July 2017 staff report, which was published when an agreement, in principle, between Athens and the Fund was first announced, in fielding stepped up questions after revising forecasts for Greece's primary budget surpluses.

The same sources reminded that the fiscal target remains at 2.2 percent of GDP for 2018, and that measures already cited in the program are enough to meet this target.

"...Next year’s primary surplus target has been set at 2.2 percent of GDP, with additional savings from ongoing pension reforms and from newly legislated measures that will rationalize redundant social programs. The authorities expect the 2018 surplus to reach the ESM program target of 3.5 percent of GDP owing to their more optimistic tax revenue and pension-spending assumptions ..." is the portion of the staff report that the IMF will put forth in the coming days.

The same paragraph continues: "Should Greece fully satisfy policy commitments and achieve the fiscal targets established in the Fund arrangement but not the ESM program targets, European partners have agreed that access to ESM disbursements would continue and that ESM targets would be reviewed..."

In other words, the IMF sources merely reminded that the Fund has already figured in measures based on a divergence from the initial 3.5-percent primary budget surplus target for 2018. That target remains an ESM goal, something that the IMF repeatedly said was unrealistically high.

The Fund has also insisted that the lowering of the tax-free income threshold be implemented in 2019, instead of 2020, if necessary to meet fiscal goals in Greece.

As it stands now with the latest forecasts cited in the IMF's fiscal monitor report, no more austerity measures will be needed beyond those already agreed to in last July's agreement between the Tsipras government and the country's institutional creditors.

That agreement is viewed as increasingly "painful" and politically sensitive for the embattled leftist-rightist coalition government in Athens, with measures extending beyond the end of the current bailout in August 2018.

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