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How the IMF’s 5th progress report shocked the new Greek government

Hardly was the new Greek cabinet was sworn-in and the report of the International Monetary Fund reached our pc screens. I can’t tell you whether the smiles on the faces of the new 42 ministers and deputy ministers froze because as I was writing these lines, Prime Minister Antonis Samaras was still holding a speech in front of the new cabinet and he is speaking to his new government goals (“to exit the loan agreements”) and blamed some “faint-hearted” and “misery-supporting” Greeks [of main opposition SYRIZA] for not believing that “Greece was exiting the Memorandums of Understanding”.

Right after the Prime Minister,  deputy PM Evangelos Venizelos, said it explicitly: “Those expecting a new loan agreement will be deeply disappointed.”

IMF progress report: additional measures, additional funding

As I shake my head left and right and press my hand-palms on my ears to remove this unpleasant noise of bottomless optimism,  I think, I should post some highlights of  the latest IMF progress report, the 5th on Greece:

IMF is pleased with Greece’s progress but worries about the Debt

A new debt relief is essential for Greece to meet long term targets.

Greece needs additional austerity measures worth 5.7 billion euro in order to fill the fiscal gap of 2015-2016.

After May 2015, the Greek program will have a financing gap of 12.6 billion euro.

The extreme scenario: Capital needs of the banks are 6 billion euro higher than estimated by the Bank of Greece.

The IMF notes fatigue in Greek authorities to implement the adjustment program, while it stresses the importance of the commitment of the euro area to support Greece, providing additional funding and further debt relief.”

The IMF wants interventions in the issues of pensions contributions and labor, change sin the payroll of the public sector, keep up the taxation system and revision in the Value Added Tax.

Public sector payroll: civil servants of primary and secondary education receive better salaries than those in the private sector. The IMF want salary decreases in the public sector.

Public sector lay-offs: The taboo of lay-offs has not be broken. The IMF wants 11,000 lay-offs in 2014 and additional 2,000 lay-offs in the first Quarter of 2015.

V.A.T. : the IMF wants to scrap VAT exemptions.

Labor: The limitations that keep the cost of business’ high and inhibit the creation or expansion of new and  large enterprises remain the same. This has to be changed.

Salaries should “freeze”

Pensions: cuts in high pensions did not bring the expected result.

The IMF is concerned about the ‘social dividends” already given to vulnerable social groups and further relevant governmental plans.

The IMF wants that Greece secures the “primary surpluses” with new salary, pensions and allowances cuts in the public sector.

From the IMF website – executive summary:

“On March 15, 2012, the Executive Board approved a four-year arrangement in the amount of SDR 23.79 billion (2,159 percent of quota; €28 billion). Purchases totaling SDR 7.2 billion (€8.1 billion) have been made so far, and a purchase in the equivalent of SDR 3 billion (€3.5 billion) is proposed to be released on the completion of the review. Euro area countries have so far disbursed €139.9 billion since this program’s approval (of €144.6 billion committed), of which €48.2 billion was for bank recapitalization. Developments. Significant progress has been made toward rebalancing the economy. The fiscal primary and external current account balances are in surplus. Investor sentiment has improved, and the government successfully placed a medium-term bond. The economy is poised to grow in 2014, after six years of deep recession. All this bodes well for a potentially virtuous cycle of recovery to take hold. But a number of challenges remain to be overcome before stabilization is deemed complete and Greece is on a sustained and balanced growth path. The real exchange rate remains overvalued, and non-tourism exports are relatively weak. Banks face a mountain of bad loans that will require adequate capital and oversight to clean up, absent which the prospects are of a prolonged deleveraging antithetical to the assumed recovery. Fiscal gaps are projected for 2015–16, and public debt remains very high. Policies. The authorities over-performed significantly on their 2013 fiscal primary balance target, achieving a surplus of 0.8 percent of GDP. Although the carryover of the over- performance to 2014 is small, the authorities are on track to achieve this year’s target. They are implementing a number of structural reform commitments, with a notable acceleration of product and service market liberalization, where progress has lagged. However, in the area of labor market reforms, where Greece has made important progress in the past, the program is now falling short of targets. Following the Bank of Greece’s stress tests, the HFSF buffer has been set aside to safeguard financial stability, and ambitious steps are planned to strengthen the private debt resolution framework. Reforms to tax codes have been legislated, aimed at simplifying the system and making tax administration easier and, thus, addressing longstanding weaknesses. But at the same time, the authorities need to guard against pressure to rollback progress. On public administration reform, progress is mixed as Greece is struggling to introduce performance-based management and address the taboo against mandatory dismissals.”

PM Samaras promises

Highlight from PM Samaras’ speech and government plans to relief the society:

“The current government should assist efforts for the debt sustainability.

“The Greek debt will be declared officially sustainable. Unemployment has already stopped rising. We need to accelerate the creation of new jobs, there must be a sense of continuity in government work.

“We need to plan many changes … Since the beginning of next month we will apply a series of major changes, such as offsetting the VAT and the reduction of social security contributions.

 The Greek people must know when the tax rates will be decreased without compromising the primary surplus. (source)

PM Samaras told the ministers that “now we want to remove social injustice” and urged them to work 24 hours per day, 365 days per year. Until 2016, when new elections are due. (other sources in Greek:, protothema)

PS OK, now let’s let the new ministers work 24/7/365  and deal with the Troika’s demands for our own benefits, and let us, common Greeks, go to the beach 🙂


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