IMF: Greece making progress but must do more on taxes

WASHINGTON Mon May 6, 2013 9:02am EDT

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WASHINGTON May 6 (Reuters) - Greece has made progress in reducing government debt and improving its competitiveness, but needs to follow through on structural reforms to ensure its economy recovers, the IMF said on Monday after a mission visit to the country.

The International Monetary Fund, one of the indebted euro zone country's international lenders, said Greece must do more to fight its 'notorious' tax evasion and open up labor competition to ensure the burden of austerity does not fall disproportionately on wage-earners and pensioners.

"Decisive corrective actions are needed in each of these areas to promote an early supply response and achieve a more balanced distribution of the burden of adjustment," the IMF said after its visit. "The mission welcomes that the government is refocusing its program in recognition of these problems."

Measures to cut Greece's budget deficit and make its economy more competitive are key conditions of its 240 billion euro ($314 billion) bailout from the European Union and the IMF.

The IMF said Greece has made "exceptional" progress on reducing its fiscal deficit since 2010, with its primary budget surplus, or the surplus before taking into account debt financing costs, set to improve by 10 percent by the end of the year.

But the country's public debt remains "much too high," the Washington-based lender said.

"It is, therefore, very welcome that Greece's European partners have now accepted that Greece could need significant exceptional support on below-market terms in order to restore debt sustainability and that they have committed to provide additional relief, if needed," the IMF said, in order to ensure Greece's debt falls below 110 percent of GDP by 2022.

"Such a commitment is essential to assure creditors that a credible framework for dealing with Greece's debt overhang is now in place."

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