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IMF report: Greece’s debt ‘highly unsustainable’, cut pensions, tax increases for the poor

‘Greek public debt is highly unsustainable, the International Monetary Fund said in a report to be discussed during a board council meeting in Washington later today.

The report, exclusively presented by Athens News Agency, said that the Greek economy faced four challenges.

The country’s public debt was highly unsustainable the IMF said and recommended a series of measures towards this direction.

The Fund recommends that Greece should adopt a “fiscal neutral policy” and noted that its economy did not need any further adjustment. However, it noted that “fiscal reforms” were needed such as reducing a tax exempt sum in order to expand the tax base and deal with the tax evasion problem.

The IMF said that the country’s financial sector should drastically reduce its non-performing loans, to strengthen corporate governance rules and to abolish remaining limitation in capital movement (capital controls) the soonest possible.

The report refers to four main challenges that would help Greece.

1.Pension cuts is top priority as well as lowering the tax free allowance.

“50% of employees and pensioners are below the current tax allowance [at 8,500 euro] with the effect that they do not pay taxes at all, while in other EU countries this rate is at 8%,” the IMF notes in its report.

2. Second priority (challenge) concerns “the ineffectiveness of tax administration and the consequent increase in debts of households and businesses to tax offices.”

3. Banks and their weak balance sheets in line with their way of management  constitute the third challenge. The IMF notes that banks managements efforts to operate without political interference have not delivered yet.

4. The structural rigidities that prevent the inclusive growth of the economy, constitute the fourth challenge.

The IMF board is to discuss the review of Greece’s economy on Monday. The decision on IMF’s participation and potential future financing is allegedly not on today’s agenda of the board of directors.

I have written quite several times, that the IMF pushes for lowering the tax-free allowance as the average salaries have plummet to 400-500 euros per month, ie. 5,600-7,2000 annual income in best cases, when employees have constant work within one calendar year

At the same time, thousands of long-time unemployed were forced into early retirement in the last years as they were unable to find work in times of economic crisis. The early retirement in the private sector meant also low pensions of 300-500 euros per month.

While in its report, the IMF criticizes the Greek state revenues depend mostly on taxes, what is the solution the Fund effectively proposes? That those who cannot escape taxation – employees and pensioners –  will suffer further income cuts, with the latter to suffer double though pension cut and tax increase.

That the IMF compares 50% of employees and pensioners not paying taxes” with “8% in other EU countries” is a stupid – excuse my language – comparison made in sterile offices by petty accountants wrapped up in kilometer-long paper rolls form the count machine.

Despite the several admissions of own calculations/projections  mistakes in the Greek program, the IMF continues its wrong policies. It will never learn that it has to overthrow, “restructure” – in the IMF language- its policies and its way of approaching the Greek program as in case of Greece the IMF has to deal with a eurozone member-state that cannot devalue its own currency.

It must have been a year ago, that the IMF – was it Christine Lagarde? – admitted it was experimenting with the rescue of a eurozone member country.

PS Comparing apples (EU) with oranges (EZ) means nothing else than that the Big Fat Greek Wedding has grown over the heads of the IMF staff.

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