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IMF paints dark outlook for Greek jobseekers for next three decades

Published:Sunday | September 25, 2016 | 12:00 AM
Greece's Prime Minister Alexis Tsipras.

The International Monetary Fund (IMF) on Friday painted a bleak outlook for bailout-dependent Greece, where it said it expects unemployment to stay in the double digits for more than three decades.

In an annual report, the IMF also called for further debt relief from the country's European creditors going "well beyond" extant proposals if the country's debt mountain is to become sustainable.

Shooting another barb at the Europeans, who insist on long-term strict budgetary policies, the Washington-based organisation said current targets of high surpluses for years to come will impede growth and prove very hard to achieve.

The report said Greek growth prospects remain weak, urged deeper cuts in "unaffordable" pensions provided to current retirees, and a tax policy review involving lower overall rates, eliminating exemptions for the rich and efficiency in fighting tax evasion.


Constant scrutiny


Greece's economy is under constant scrutiny from its bailout creditors, the IMF, and European governments and institutions.

The left-led government is in negotiations with bailout inspectors on the course of mandated reforms, whose completion would allow release of a €2.8 billion (US$3.14 billion) rescue -loan instalment.

Late Friday, it tabled to parliament for approval next week a raft of these reforms. They include an energy market shake-up and transferring to the state privatisation fund the water companies of Greece's two biggest cities, the Athens subway and another three public entities. The country has kept afloat on some €200 billion in bailouts released since 2010 in return implementing successive spending cuts and reforms that improved fiscal stewardship but left Greek society in tatters.

The economy has shrunk by a quarter, while unemployment is the highest in the 28-member European Union: Having hit a high of about 28 per cent in early 2014, it remained at a bloated 23 per cent in April-June.

"Looking forward, growth prospects remain weak and subject to high downside risks, and unemployment is expected to stay in the double digits until the middle of the century," the IMF report said.

It said current bailout commitments for Greece to post primary budget surpluses - that is, excluding the cost of debt servicing of 3.5 per cent from 2018 on are "unrealistic".

Greece also cannot be expected to "simply grow out of" its huge debt-to-GDP ratio, estimated at about 180 per cent, the IMF said.


Debt relief


"Further debt relief will be required ... going well beyond what is currently under consideration, and it should be calibrated on realistic assumptions about Greece's ability to generate sustained surpluses and long-term growth," the report said.

The IMF has long been pressing for substantial debt relief from Greece's European creditors, who say they would consider reducing rates and extending repayment deadlines but rule out any reduction in the net value of the loans.

Greek Finance Minister Euclid Tsakalotos said he welcomed the IMF observations on the debt and high surpluses but insisted that Greece has already passed its required raft of pension and tax reforms effectively ruling out further pension cuts. That would be politically toxic for the government, which has already ditched initial pledges to reverse creditor-imposed austerity and is lagging more than seven points behind the main opposition conservatives in recent polls.