Current Greece Bailout Plans Not Realistic: IMF

The IMF said that the fiscal projections underpinning Greece’s proposals for its bailout program are unrealistic.

The International Monetary Fund said on Friday that the fiscal projections underpinning Greece’s proposals for moving ahead in its bailout program are not realistic.

Poul Thomsen, director of the IMF’s European Department, raised questions about the forecast that Greece could maintain a 3.5 percent budget surplus for years as part of its plan for debt relief from European Union creditors.

We question whether it is plausible for a country with such high unemployment and the attendant social pressures to be running such big surpluses over many political cycles to come. So we are cautioning that... the debt relief needs to be calibrated on something that we think is more realistic.

Poul Thomsen

Thomsen was speaking after Greek Prime Minister Alexis Tsipras said in an article published in the Financial Times that the IMF should stop tinkering with the country’s latest bailout with European creditors, blaming the global lender for causing a delay in talks.

The IMF has been standing by with the possibility of adding its funds to the country’s third bailout program with the EU but says it needs to see a strong package of structural reforms and a “credible” plan for growth and fiscal adjustment going forward.

Thomsen said the IMF could back the outline EU-Greece plan but it has to understand how fiscal targets and a return to economic growth can be achieved.

To reach the 3.5 percent target, he said, Greece would need to take large fiscal measures, the equivalent of around 4.5 percent of GDP.

We think that’s a lot. That’s a lof of – if you want – austerity. If Greece and its European partners want to stick to that target, we can accept that target. But we need to see the measures.

Poul Thomsen

He said the IMF still believes Athens needs to prioritize structural reforms, particularly in tax collection.

Tax evasion has kept on going up and up, and tax collection rates have gone down and down and down... the numbers are truly extraordinary. What we need to do is to broaden the tax base... that’s the first point of discussion.

Poul Thomsen

He noted that Greece exempts 55 per cent of households from taxes, compared to two percent in Portugal.