Washington, DC.- (Reuters, AP, ANA-MPA)
International Monetary Fund Managing Director Christine Lagarde said on Saturday the fund’s team will return to Athens next week for talks on the Greek debt crisis but warned that there may not be “immediate” outcomes.
“All I can say is that we had productive and cordial meetings with the various participants” involved in talks on Greece’s bailout during the IMF’s spring meetings, Lagarde said in a news conference.
“There’s plenty of work to do so don’t expect any immediate outcomes because those things take time. Our position on the Greek economic sustainability and stability has not changed,” she said.
The IMF on Friday said that the fiscal projections underpinning Greece’s proposals for moving ahead in its bailout program are not realistic.
IMF European Department director Poul Thomsen raised questions about the forecast that Greece could maintain a 3.5 percent budget surplus for years as part of its plan for debt relief from EU creditors.
“We question whether it is plausible for a country with such high unemployment and the attendant social pressures to be running such big surpluses over many political cycles to come,” Thomsen said at the spring meetings of the IMF and World Bank in Washington. “So we are cautioning that… the debt relief needs to be calibrated on something that we think is more realistic.”
Thomsen was speaking after Greek Prime Minister Alexis Tsipras wrote in an article published in the Financial Times that the IMF should stop tinkering with the country’s latest bailout with European creditors, blaming the global lender for causing a delay in talks.
The IMF has been standing by with the possibility of adding its funds to the country’s third bailout program with the EU, but said it needs to see a strong package of structural reforms and a “credible” plan for growth and fiscal adjustment going forward.
Thomsen said the IMF could back the outlined EU-Greece plan, but has to understand how fiscal targets and a return to economic growth can be achieved.
To reach the 3.5 percent target, he said, Greece would need to take large fiscal measures, the equivalent of about 4.5 percent of GDP.
“We think that’s a lot. That’s a lot of — if you want — austerity,” he said. “If Greece and its European partners want to stick to that target, we can accept that target. But we need to see the measures.”
He said the IMF still believes Athens needs to prioritize structural reforms, particularly in tax collection.
“Tax evasion has kept on going up and up, and tax collection rates have gone down and down and down… the numbers are truly extraordinary,” he said, adding that Greece exempts 55 percent of households from taxes, compared with 2 percent in Portugal.
Presenting a policy agenda document released during the IMF and World Bank spring meetings in Washington, Managing Director Christine Lagarde said “the last thing Greece needs is delay [in its bailout program review]. I totally agree with the Greek government on this”.
The IMF Managing Director appeared unmoved from her tough demands and insisted the targets set out by the IMF must be achieved by the Greek government.
According to the IMF chief, only if the Greek government and Greek citizens really made heroic efforts, absolutely heroic efforts the 3.5% primary surplus target could be achieved.
Christine Lagarde added that the IMF always believed that real and realistic figures are needed as well as measures that can be implemented. She added that the Greek bailout program must rely on two pillars: being realistic and being sustainable.
The IMF always believed that real and realistic figures are needed as well as measures that can be implemented, Lagarde pointed out.
The climate being developed between Greece and the IMF of late is reminiscent of last summer’s negotiations and the great financial and political crisis that followed.
Greece’s European creditors want the Greek bailout program review to be wrapped up immediately and believe that Greece and the EU institutions are very close to a deal.
The role of the United States, however, will be crucial and this is why the European Commission will reportedly attempt to convince US Treasury Secretary Jack Lew that the Greek review should not be allowed to drag on until June. European officials are expected to urge US officials in Washington to pressure IMF Managing Director Ch. Lagarde to make concessions and step back from some tough demands.
Eurogroup President Jeroen Dijsselbloem will also apply pressure during his meetings with key players at the IMF Spring Meeting for the review to be concluded by early May.
On Thursday the Greek government expressed satisfaction with the result of Prime Minister Alexis Tsipras’ meeting with European Parliament President Martin Schulz.
According to Greek reports, Schulz acknowledged there was no need for Greece to take additional measures. The Greek PM explained the decision to table tax and social security reform bills to parliament, which is “the right of any sovereign country’s government” according to Athens.
Schulz and Tsipras reportedly “agreed that institutions and the Greek Government should follow the agreement reached last July,” when it was decided to grant Greece a third bailout.
“Greece and institutions are invited to do the best they can to complete the review as soon as possible”, was the statement of the two leaders.
Greece and its lenders made good progress in Washington toward reaching a deal that would unlock more loans for Athens, but work needs to continue next week before a crucial euro zone finance ministers’ meeting on April 22, a key EU official said.
Talks on the reforms that Greece needs to implement have been suspended for the duration of the International Monetary Fund’s meetings this week because all key players have travelled to Washington, where the meetings are taking place. They held bilateral meetings on Greece here.
Greek Finance Minister Euclid Tsakalotos met with German Finance Minister Wolfgang Schaeuble, U.S. Treasury Secretary Jack Lew, European Central Bank President Mario Draghi, IMF head Christine Lagarde and the chairman of euro zone ministers Jeroen Dijsselbloem. IMF and European officials also discussed Greece in bilateral meetings.
“Good progress has been made in recent … days and more still needs to be done to reach a point where we could conclude the review (of the Greek reforms),” European Commissioner for Economic and Financial Affairs Pierre Moscovici said.
The conclusion of the review of Greek reforms is a condition for any new lending to Athens and for the start of any debt relief talks.
Moscovici noted that lenders’ representatives would return to Athens next week to prepare ground for the next meeting of euro zone finance ministers in Amsterdam on April 22.
Moscovici said the Amsterdam talks were meant to “make significant progress”, but depended on how much could be achieved in the run-up to the discussions next week.
“The political will to find an agreement is there on all sides,” Moscovici said.
Greece needs to legislate a politically difficult pension reform, changes to the personal income tax system and deal with non-performing loans in the banking system.
“We need to have all the reforms … legislated in a credible manner,” Moscovici said.
Euro zone lenders and the IMF disagree on some targets set out in the latest Greek bailout, notably a primary surplus goal of 3.5 percent of GDP in 2018 and beyond. The Fund says it is unrealistic to expect Greece to keep such a surplus for decades.
“The memorandum of understanding (with Greece) does not speak about decades. The MoU speaks about 2018 and what we want to meet is 3.5 percent in 2018,” Moscovici said.
The MoU says that “the (Greek) authorities will … pursue a new fiscal path premised on primary surplus targets of -0.25, 0.5, 1.75, and 3.5 percent of GDP in 2015, 2016, 2017 and 2018 and beyond, respectively.”
The “beyond” 2018 refers to maintaining the surplus from that year so that Greece can service its debt obligations.
The IMF believes the primary surplus goal should be set at 2.5 percent of GDP and the euro zone, Greece’s main creditor, should grant the country debt relief, by extending maturities of loans and longer grace periods to allow for that.
US MOVES ON
Greece is expected to be among the topics on the agenda of talks on Sunday when US President Barack Obama is to meet with German Chancellor Angela Merkel in Hanover. Obama is traveling to Germany to join Merkel for the launch of the Hanover Messe, a major global trade fair for industrial technology.
Deputy National Security Advisor Ben Rhoeds briefing journalists on the trip said Obama – and Merkel will discuss both the effect of the refugee crisis to Greece and the efforts for Greece to overcome its present financial problems and move to a path of sustainable edvelpment.
U.S Treasury Secretary Jacob J. Lew met on Friday with Greek Finance Minister Euclid Tsakalotos, German Finance Minister Wolfgang Schäuble and the President of the Eurogroup Jeroen Dijsselbloem.
According to a Treasury spokesperson, Secretary Lew and Minister Tsakalotos discussed the importance of Greece, the IMF, and European institutions concluding the first review of Greece’s economic reform program in a timely manner. The Secretary urged Greece to accelerate progress on agreeing to and implementing robust reforms, and underscored the importance of Europe following through on its commitment to put Greece’s debt on a sustainable path through debt relief
With Ministers Dijsselbloem and Schäuble they discussed progress being made toward concluding the first review of Greece’s economic reform program. Secretary Lew encouraged Europe, the IMF, and Greece to accelerate their efforts to conclude the review and agree on meaningful debt relief for Greece in a timely manner.