Greece’s plan for reducing its budget deficit will fall short unless the government steps up fiscal and structural reform efforts, the IMF’s chief of mission to the debt-laden country said yesterday.
Greece is struggling to meet targets set in the 110 billion euro (US$156.9 billion) EU/IMF bailout that saved it from bankruptcy last year, with efforts hampered by a deep recession, weak revenues and tension among ruling party ranks.
It cut its deficit to 10.5 percent of GDP last year — more than 2 percentage points over an initial target — and must reduce it to 7.6 percent this year to meet the targets in the bailout.
Poulsen said that without further reforms, Athens would not be able to reduce the deficit much below 10 percent.
“The program will not remain on track without a determined reinvigoration of structural reforms in the coming months,” Poul Thomsen told an economic conference in Athens. “Unless we see this invigoration, I think the program will run off track.”
Europe’s top financial officials broke a taboo on Tuesday and acknowledged for the first time that Greece might have to restructure its debts.
However, European Central Bank Executive Board member Juergen Stark told the same conference that a debt restructuring of any kind would not solve Greece’s problems.
“A debt restructuring will wipe out part or all the capital of Greek banks, so it is a recipe for catastrophe,” he said. “If the [economic adjustment] program is implemented one-to-one, then debt sustainability is ensured and Greece is solvent.”
EU and IMF inspectors are still waiting for Greece to fill gaps in its proposed budget fiscal and privatization plans — which are key to releasing the next tranche of aid — and will continue talks this week, sources have said.