IMF says Greece must deliver reforms at a faster pace
- 31 July 2013
- From the section Business
The International Monetary Fund (IMF) says Greece needs to take more action to promote growth and deliver promised structural reform.
On Monday it backed the next payment of 1.7bn euros (£1.5bn: $2.3bn) after its fourth review of the country.
But now it says Greece must deliver "rapidly on structural reforms to unlock growth and create jobs",
It also pointed to a potential 10.9bn euros "financing gap" over the next two years.
Greece was granted a huge 110bn euro (£93bn; $145bn) IMF/EU bailout in May 2010.
On Monday EU sources told Reuters there were various ways in which this gap for 2014 could be closed, either through member states providing new loans, or the possibility of Greece returning to the markets to issue short term bonds.
They said then that the issue will have to be discussed in the autumn.
"The [Greek] economy is rebalancing," the IMF said on Wednesday. "However, it continues to do so through recession, not productivity-enhancing structural reform."
Greece is in its sixth year of recession, and has seen a 25% drop in output since a 2007 peak, and has an unemployment rate of 26.9%.
But the IMF also says the country has stabilised its economy and is on course to end its recession next year, despite missing targets for privatisation and shedding state jobs.
The coalition government is struggling to meet staff reduction targets to its sizeable public sector, and is due to announce details of its plan to suspend up to 25,000 employees on reduced pay by the end of the year.
In addition the IMF said that although the process of recapitalising banks was complete, moves to privatise state sectors and liberalise regulated professions were behind schedule.
"The onus therefore remains on delivering rapidly on structural reforms to unlock growth and create jobs, which would lessen the pain of further adjustment," the report said.
The IMF said Greek debt would peak at around 176% of GDP in 2013, and decline to 124% in 2020, "after additional contingent relief measures of about 4% of GDP from Greece's European partners to be determined in 2014/15".
"Debt sustainability concerns continue to remain a risk," it said.
"Should debt sustainability concerns prove to be weighing on investor sentiment even with the framework for debt relief now in place, European partners should consider providing relief that would entail a faster reduction in debt than currently programmed."
The IMF had said earlier in the week that eurozone finance ministers had given assurances that they would "consider further measures and assistance, if necessary, to reduce debt to substantially below 110% of GDP by 2022, conditional on Greece's full implementation of all conditions contained in the [IMF bailout] programme".