The quartet of institutions resumes the review process in Greece with the objective of reaching Staff Level Agreement (SLA) until the end of the year.
The European Commission spokesperson on Financial Affairs, Annika Breidthardt, confirmed in the Berlaymont press room on Monday that the heads of mission of all four institutions are back to reviewing the program. “The SLA will include what is necessary for the second review; those include the measures that have been agreed within the time frame of the program,” Breidthardt noted.
The Commission will keep away from SLA negotiations at this point, including the negotiation of fiscal consolidation measures for 2019-20. Athens and Brussels want the International Monetary Fund (IMF) to be on board the program and, therefore, take part in the review of the program.
Well-informed sources told New Europe that an SLA agreement does not mean a positive final review. That could take time, as Greece does not have any debt refinancing needs at this point.
Obstfeld – Thomsen: “The IMF is not demanding more austerity.”
“The IMF is being criticized for demanding more fiscal austerity, in particular for making this a condition for urgently needed debt relief. This is not true, and clarifications are in order,” says Maurice Obstfeld, the Economic Counsellor and Director of Research of the IMF argues.
On the contrary, “the IMF is not demanding more austerity,” he clarifies.
“When the Greek Government agreed with its European partners in the context of the ESM program to push the Greek economy to a primary fiscal surplus of 3.5% by 2018, we warned that this would generate a degree of austerity that could prevent the nascent recovery from taking hold.”
In doing so, Obstfeld echoes Poul Thomsen, Director of the IMF’s European Department.
According to the IMF, fiscal measures envisaged by the ESM program will deliver a surplus of only 1.5% of GDP, just enough for the Washington-based institution to remain on board.
“We did not call for additional measures to achieve a higher surplus. But contrary to our advice, the Greek Government agreed with the European institutions to temporarily compress spending further if needed to ensure that the surplus would reach 3.5% of GDP,” underlines the IMF.
Slamming Athens’ spins, the IMF makes clear that it is opposed to further austerity in Greece at this point. “Claiming that it is the IMF who is calling for this turns the truth upside down.”
The IMF further criticizes the fundamental problems of Greece’s “huge fiscal adjustment,” for keeping half of the households out of any income tax obligation and its “extremely generous pension system that costs the budget nearly 11 % of GDP annually.”
“Instead of tackling these difficult problems, Greece has resorted to deep cuts in investment and so-called discretionary spending,” to such an extent that “decaying infrastructure is hampering growth and the delivery of basic public services such as transportation and health care is being compromised.”
Greece: Tsakalotos is “very disappointed” with IMF
The IMF is criticizing Athens, reacting to some extent to the budget debate last week in the Greek Parliament.
Greece asks for more fiscal space, threatening with elections, and even suggesting that the prospect of elections was welcome at last week’s Eurogroup meeting
“No government will be able to pass through parliament more measures beyond 2019.” The is no political capital or economic rationale in that course said the Greek finance minister, Euclid Tsakalotos, in an interview with Reuters on Monday.
“I am very disappointed with the IMF; on countless occasions, the IMF says that Greece should not be expected to maintain very high surpluses in the aftermath of the program and that “Greece cannot have more austerity.” The Greek Finance Minister agreed to a 3.5% surplus objective during the last Eurogroup meeting putting the blame on the IMF.
“In all honesty, I didn’t see them giving any fight against the Europeans to reduce the fiscal surplus,” Tsakalotos added. “What we want is an IMF that fights on two fronts,” he said.