Greece is on track to fall short of budget-surplus targets for this reason Greece won’t meet fiscal surplus targets set by Europe, IMF says The International Monetary Fund said on Monday that Greece’s economy would only grow by just under 1.0 percent in the long run given the constraints of its bailout program, but should meet the fiscal surplus target preferred by most IMF directors.
In its annual review of Greece’s economic policies, the IMF said most of its board directors favor a Greek fiscal surplus target of 1.5 percent of gross domestic product by 2018, while some directors favor the higher 3.5 percent target sought by Greece’s European lender group.
The Fund did not identify which directors favored the higher target or how many of its 24-member board shared that view.
The rare split among IMF’s directors reveals some divisions in their views of Greece’s fiscal performance and debt sustainability as the IMF considers whether to participate in a new bailout for Greece needed by mid-2018.
The IMF has abstained from financial involvement in Greece’s third bailout from European lenders since 2010, but remains actively engaged in negotiations on a new deal to start in mid-2018.
IMF Managing Director Christine Lagarde and other senior officials have argued that a Greek fiscal surplus target of 3.5 percent of GDP is too ambitious and massive debt relief or further austerity measures, which would hurt growth.
Germany, which contributes the most to Greece’s bailout, faces national elections in September, and is strongly against any discussion of debt relief before Greece reaches the bailout target.
The IMF review did not address whether the Fund would commit financial resources to Greece. The fund said that the directors recognised that austerity measures and reforms have “taken a heavy toll on society that, together with high poverty and unemployment rates, has contributed to a slowdown in the reform implementation”.
“Most directors agreed that Greece does not require further fiscal consolidation at this time, given the impressive adjustment to date.” So Greece won’t meet fiscal surplus targets set by Europe, and there are a lot of proper reasons for non-meet.
Despite the divisions over the fiscal target, the IMF said the directors called for Greece to broaden its personal income tax base and rationalize pension spending to make room for lower tax rates and more aid to the poor.
Greece is expected to need a new tranche of aid under the current 86 billion euro ($92 billion) program by the third quarter of this year, and the head of Greece’s bailout fund said last week that a further slice of aid could only be granted once the IMF decides to formally join the program.
The IMF’s assumptions aren’t based in reality and don’t take into account the reform of Greece’s public finances, according to a European Union official who spoke on condition of anonymity because the discussions are sensitive.
We don’t know exactly the consequences of the fact that Greece won’t meet fiscal surplus targets set by Europe, but there will be for sure, and probably they will fall within all the members of EU.
But there is the other side of the coin to consider: Jeroen Dijsselbloem, head of Eurogroup of finance ministers, says claims of crisis are exaggerated as emergency talks begin.
Jeroen Dijsselbloem, the Dutch finance minister and president of the Eurogroup of finance ministers, called a surprise meeting with other key players in Brussels, as Greece and its EU creditors sought to hammer out a deal on the next stage of the country’s €86bn (£73bn) bailout.
Greece needs to agree economic reforms with its EU partners to unlock the next tranche of bailout funds before debt repayments due in the summer. A meeting of eurozone finance ministers on 20 February is widely seen as the last chance to reach a deal before critical elections in the Netherlands, France and Germany this year.
Dijsselbloem dismissed the idea that the bailout programme was in crisis. “The story that there’s a crisis is roundly exaggerated,” he said on Friday in The Hague. “The next large payment that Greece needs to make on its debt isn’t until this summer. But if I can give them a push today, that would be very welcome.”
According to Dijsselbloem if Greece won’t meet fiscal surplus targets set by Europe, other members of the EU have to push this Country to pay what’s due. Only this way Greece will raise from crisis.