11Both praising and pushing the ruling Radical Left SYRIZA of Prime Minister Alexis Tsipras, the Washington, D.C.-based International Monetary Fund (IMF) said the government needs to press on with more reforms and austerity the lender said had proved were working.
In its first report since the country on Aug. 20, 2018 exited eight years of three bailouts of 326 billion euros ($368.3 billion) that came from the IMF as well as the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM,) the agency said a recovery depends on Tsipras sticking to his guns and not trying to wiggle out of reforms to gain favor in an election year with polls showing he will lose.
Under the terms of Greece’s exit from the rescue packages, Greece must hit economic targets or risk triggering automatic spending cuts, with Tsipras saying he’s bringing recovery without mentioning, if so, it’s largely because he reneged on anti-austerity vows.
The IMF expects Greece’s economy to grow 2.4 percent this year and 2.2 percent in 2020 before slowing in subsequent years, it said, reiterating projections it made two months ago, the news agency Reuters aid.
Growth will be helped by stronger consumption this year after an 11 percent hike in the minimum wage, the first such increase since the crisis began, four years after Tsipras promised to hike it 22 percent to meet pre-crisis levels.
But rising wage pressures and the reversal of labor reforms may hit employment in a country whose the jobless rate stands at 18 percent, and the banking sector remains vulnerable, the IMF added, saying that, “Greece should reconsider recent changes in collective bargaining policies and press ahead with its unfinished reform agenda.”
Tsipras also agreed to new taxes beginning in 2020 on previously exempt low-and-moderate income families after a barrage of hikes and new taxes decimated workers, pensioners and the poor, those he said he would save from austerity.
He said if he manages to defeat the poll-leading New Democracy, the party he unseated in 2015, that he would cancel the taxes on those who hadn’t been required to pay because their incomes were too low.
The IMF cited other fiscal worries, including increased budget costs due to legal challenges to past wage and pension cuts, reform fatigue and pre-election uncertainty that is also making potential investors wary.
Eurozone finance ministers could grant Greece some 970 billion euros ($1.095 billion) in the return of profits from Eurozone banks in Greek bonds but only if the reforms are met, after Greece missed a March 11 deadline and saw the installment delayed.
Greece, which has tapped bond markets twice this year but at interest rates more than three times higher then the bailouts, has a 22-billion euro ($24.85 billion) cash buffer taken from what was left over from an 86-billion euro ($97.16 billion) third bailout in 2015 that Tsipras said he would never seek nor accept but did, and then imposed more austerity.
Greece’s capacity to repay the IMF is currently “assessed to be adequate,” but if fiscal risks materialize, that capacity “could become challenged over the medium term,” the IMF said. But there were also worries Tsipras would pander to voters with elections required to be be held by October, and possibly as soon as May 26 to coincide with those for Greek municipalities and the European Parliament where surveys show SYRIZA is set to take a pounding from voters anxious to get back at him for going back on his word.
“We are concerned about the pressures that elections will have on policy,” said the head of the IMF mission in Greece, Peter Dolman, who said the agency was anxious what the government would do about protecting primary residences from bank foreclosures.
The IMF noted that the country’s economic recovery is continuing but warned that the reform momentum is slowing and downside risks are rising, other media reports said.
“To maintain its hard-earned competitiveness and boost medium-term prospects, Greece should press ahead with its unfinished reform agenda,” it said.
The report warned of fiscal risks that “might possibly arise from court rulings on past wage and pension reforms.” It also said that the business environment is poor, “given an unfinished structural reform agenda and labor market reversals.”
“Downside risks, not least from legal challenges to past fiscal measures, recent labor market policy decisions, and election uncertainty have increased,” it said.
That came after the IMF said Greece had entered a period of economic growth that puts it “among the best performers in the Eurozone,” because of reforms Tsipras didn’t want and now is trying to get out from under to return to power.