GREEK AUSTERITY:ATHENS – The International Monetary Fund stepped up pressure on Greece yesterday, saying promised reforms were running behind schedule in most areas and the delays were stalling recovery in an economy now in its fourth year of recession.
Greece has been dependent on international support to keep paying its bills since an escalating debt crisis shut it out of bond markets last year. The IMF expects its economy to contract by 6 per cent in 2011 and by 3 per cent in 2012, in what would be its fifth year of recession.
Poul Thomsen, deputy director of the IMF’s European department, said Athens could not rely on more tax increases and blunt across-the-board spending cuts but needed to look at “taboos” that could include laying off more state workers.
“Greece needs to consider more aggressively closing down redundant state enterprises and entities, and it might have to accept in the process involuntary redundancies,” Mr Thomsen, who heads the IMF’s mission to Greece, told a conference in Athens.
The comments underline the stark challenge facing prime minister Lucas Papademos as he grapples to pass another round of bitter austerity measures before early elections tentatively scheduled for February.
Although Greece accounts for no more than about 2 per cent of euro zone GDP, the festering debt crisis has brought the whole bloc to the brink of disaster as much larger economies including Italy have been drawn in.
Officials from the “troika” of lenders made up by the IMF, European Union and European Central Bank have been in Athens since Monday, working on a new €130 billion bailout that Greece will need to stave off bankruptcy next year.
Mr Thomsen said he strongly disagreed with critics who charged that Greece had failed to achieve any progress but he said the joint bailout plan set up by the IMF and the European Union had overestimated the government’s capacity to implement reforms.
– (Reuters)