The International Monetary Fund insists on additional austerity measures and reiterates that the primary surplus of 3.5 percent of GDP cannot be achieved. In its Greek report published on Thursday, the IMF projects a primary surplus of 2.2% of GDP in 2018. IF the IMF’s forecast is not revised, Greece may see obligated to implement the additional austerity measures worth 2.2 billion euros.
According to migrantiou.com the IMF explained on Thursday that “it is not asking the Greek government to take extra measures to fill the budget gap resulting from its difference with the Europeans in the percentage of the primary surplus.”
This sounds like IMF trolling as the Fund enforced the Greek government to agree upon additional austerity measures that are to be implemented under certain conditions.
It’s just the old ‘additional austerity measures’ the Greek government was forced by the IMF to agree upon last spring in order to finally conclude the second review of the Greek program although the Fund does not participate in the program.
The IMF is asking for a primary surplus of 2.2 of GDP in 2018 compared to the Europeans who are asking for a 3.5 pct of GDP primary surplus.
The Fund also reminded last summer’s report according to which there was an agreement with the Greek authorities on the issue. Provided that Greece meets its political commitments (reforms) and achieves the Fund’s financial target (2.2 pct of GDP primary surplus ) and at the same time fails to meet ESM’s 3.5 pct surplus target), then the Europeans have agreed that Greece’s access to ESM tranches will continue and the targets of the ESM programme will be re-examined.
The target for the primary surplus has been agreed at 1.8 pct of GDP this year. It will be supported by the already legislated reforms in pension, VAT and tax system. The target for next year’s primary surplus has been set at 2.2 pct of GDP.
Citing analysts, daily Kathimerini reports that the IMF’s forecast could be a source of misery not just for Athens, which may once again be forced to look down the barrel of fresh measures next year to the tune of 2.3 billion euros – 1.3 percent of GDP – but for its European Union partners as well, who will have to decide whether to go along with the IMF’s forecast or not.”
If they do not, then the risk of the IMF leaving the Greek program will be higher.
As part of the second review, the Greek coalition government had agreed to implement additional austerity measures worth 2.2 billion euros in 2019 and 2020. For 2018 there was agreement that an automatic fiscal mechanism – the “cutter” – should be activated if Greece failed to meet the fiscal targets.
“If the IMF does not revise its assessment then it is highly likely that the cutter will be activated,” Kathimerini notes adding that “iIn any case, analysts say that the third review will most likely run into trouble as a result of yesterday’s report by the IMF which also said in July that the need may arise to expedite already agreed cuts in pensions and reductions in the income tax threshold.”
Moreover, the government may be obliged to suspend the planned counter measures to offset austerity until 2023.
Following Schaeuble’s line, German free Democrats had also insist on participation of the IMF in the Greek program.
But first the European lenders and the IMF should agree on using the same calculators for their forecasts otherwise the problem will be dragging… and dragging… and dragging…
Two years after the 2015 agreement, the IMF decision is still pending. …and pending …and pending… and pending…
PS The third review smells indeed like new trouble as any review before. And Germany has not agreed yet on its new coalition government.