IMF: Greek economy improved, but may need more debt relief

IMF: Greek economy improved, but may need more debt relief
The Associated Press

ATHENS, Greece (AP) — Greece has significantly improved its economy as it heads toward the end of its bailout program in August, but its debt pile will remain difficult to manage in the long term, the International Monetary Fund said Friday.

In a report of the country’s economy, the IMF said the country would emerge from its bailout “having largely eliminated macroeconomic imbalances.” It noted, however, that growth was still hampered by “significant crisis legacies and an unfinished reform program.”

The finance ministers of the 19-nation eurozone agreed last week to grant a 10-year extension to the repayment of loans, as well as to release a last batch of bailout loans worth 15 billion euros ($17 billion). In return, Greece has agreed to run primary surpluses — that is, a budget surplus when excluding the cost of financing debt — until 2060.

The debt deal “significantly improved debt sustainability over the medium term, but longer-term prospects remain uncertain,” the IMF said.

Greece has depended on rescue loans since 2010, gripped by a financial crisis that twice saw it almost crash out of the European joint currency. In return, governments have overhauled the pension and social security systems, raised taxes and slashed spending. The country saw a quarter of its economy wiped out, and unemployment reach nearly 28 percent at the height of the crisis. The jobless rate remains above 20 percent.

The IMF said the debt relief deal appeared based on “very ambitious assumptions” about economic growth and public finances. It said it could be difficult for Greece to remain financially independent without further debt relief.

It also said Greece’s budget targets would require high taxation, limiting spending and investment.

The IMF stressed the need to protect the independence of the country’s statistical authority and improve the effectiveness of the judiciary.

In a highly politicized case, one of the country’s former statistics chief, Andreas Georgiou, has been fighting court battles over accusations he deliberately inflated budget deficit data. However, he took over the statistical agency months after Greece had revised previously misreported budget deficit data and was spiraling into financial crisis.

Greece’s European bailout creditors have repeatedly defended Georgiou, arguing that his leadership was key to the country’s ability to provide reliable fiscal statistics.

“Improving governance and the independence of public institutions, including by ensuring adequate protection for officials – such as those in charge of statistical reports – is essential to increase confidence in public finances and ensure data integrity,” the IMF said.