Greece’s structural reforms have not gone far enough and the government is unable to raise more revenue through tax increases, the International Monetary Fund’s mission chief to the country said.
“There has been too much reliance on taxation,” Poul Thomsen, deputy director of the IMF’s European department and mission chief to Greece, said in a conference call with reporters today. “Structural reforms have fallen short. They are well behind schedule.”
The IMF approved a payment of 2.2 billion euros ($2.9 billion) to Greece on Dec. 5 as part of a joint program with the European Union. That followed a Nov. 30 agreement by euro-area finance ministers on a 5.8 billion-euro loan to Greece under last year’s bailout.
Greek authorities have struggled to implement reforms approved in June, the Washington-based IMF said in a review of Greece released today that was dated Nov. 30. Plans to privatize state assets are advancing, though “difficult market conditions and technical delays” prevented any sales during the third quarter.
Prime Minister Lucas Papademos’s 2012 budget, approved on Dec. 7, aims to reduce the fiscal deficit to 5.4 percent of gross domestic product from 9 percent this year. Efforts to trim the shortfall have deepened the recession, now in its fourth year. The Organization for Economic Cooperation and Development expects the economy to contract by 6.1 percent this year, more than the 5.5 percent forecast in the government’s budget.
Thomsen said it’s too early to know whether “additional measures” will be needed to fund Greece. “Our view is that there is a need to refocus the fiscal program on the expenditure side. We have reached the limit of what can be achieved through increase in taxes.”
The IMF and the EU had frozen loan payments last month after Socialist Premier George Papandreou announced a referendum on the second rescue plan. He later called off the vote, resigned and was succeeded by ex-central banker Papademos, whose interim government has the support of three parties to press ahead with budget cuts needed for continued aid.
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