IMF Says It’s Not Pushing More Austerity

ATHENS – With Greece and its lenders still at odds over unfinished reforms and a hole in the 2014 budget that is holding up release of a one billion euro ($1.37 billion) installment, the government can still avoid more austerity, an envoy for the International Monetary Fund (IMF) said.

Poul Thomsen is the point man in Athens for the IMF, which, along with the European Union and European Central Bank makes up the Troika which is putting up $325 billion in two bailouts to save the economy from collapsing.

Those have come, however, with harsh pay cuts, tax hikes, slashed pensions and the coming firing of as many as 40,000 public workers and Prime Minister Antonis Samaras, fearing social unrest if he reneges on his promise not to implement more, said Greece can fill a budget hole of as much as 2.9 billion euros ($3.67 billion) without doing it again.

Thomsen said cuts aimed at workers, pensioners and the poor can be avoided but that the government needs to keep making structural reforms and fulfill years of broken promises to root out waste and go after tax cheats who owe $70 billion.

“We agree with the authorities that horizontal measures should be avoided,” Thomsen said in an interview published in Sunday’s Kathimerini, adding that he understood that “new fiscal measures are difficult politically and socially.”

Any cutbacks should be “targeted carefully to protect the most vulnerable,” he said. “Further measures will be needed for 2014-2016 but they will be on a much smaller scale than in the past,” Thomsen said.

The IMF envoy insisted that a ban on foreclosures should be lifted at the end of the year because he said it was being taken advantage of by some who can afford to meet their mortgage payments.

He said there should be a system for protecting people who are at risk as even Deputy Prime Minister Evangelos Venizelos, the PASOK Socialist leader who is serving the New Democracy leader Samaras in a coalition government, said most of those in default on mortgages genuinely can’t afford to pay.

Thomsen also called for easing restrictions on collective dismissals in the private sector, noting that the changes would help curb unemployment by encouraging companies to open without fears that they cannot dismiss their staff if things do not work out.

A stalled overhaul of the civil service must continue, Thomsen said, noting that it is still “taboo to talk about laying off non-performing workers.”

Overall Thomsen said Greece has made “enormous progress in restoring fiscal sustainability,” adding that the country is on target to post a primary surplus “which is a major milestone.” Asked why talks with the Troika were dragging, he cited “an unusually large number of complex issues,” including a new property tax. As for Greek banks, they have been “fully recapitalized,” he said, but they are still not lending.