Bailout chiefs arrive in Greece to assess public sector reform progress

28 Feb 17

International lenders have arrived in Greece today to examine the implementation of public sector reforms needed before the latest tranche of cash can be released as part of the country’s international bailout deal.

The mission was announced in a statement by the German government on Friday, which also confirmed that, following talks with German chancellor Angela Merkel, IMF managing director Christine Lagarde does not believe that a Greek debt haircut is current necessary.

Greece has received three international bailouts following the financial crisis, but the release of funds in the latest package has been based on implementation of public sector reforms.

The team from the European Commission, IMF and European Central Bank will judge if enough progress has been made to release further funds in the current bailout deal, which is set to run until 2018. Areas to be examined include pension cuts and privatisations, and further disbursements under the ongoing rescue programme depend on progress.

The IMF is not formally part of the third and latest bailout deal, having split from the other bodies in a dispute over the requirement for further spending cuts in the package without debt relief.

The fund concluded that requirements to reach a budget surplus of 3.5% of GDP by 2018 is unachievable and would require a degree of austerity that could threaten the Greek economy’s nascent recovery. However this target was insisted on by the European lenders, which said the fund was “overly pessimistic” on the country’s economic prospects.

In a statement released on Friday, Lagarde said debt relief was not needed at the moment. Instead, she urged Greece to undertake further reforms especially targeting the tax and pensions system, with the need for “discipline and structural reforms”.

The current mission could lead to the creation of a roadmap that would add the IMF to the latest bailout package, as European creditors having moved to focus more on economic reforms than austerity in recent weeks.

Pierre Moscovici, the European commissioner for economic affairs, reported that 19 finance ministers of the single currency agreed that the Greek people needed to see “light at the end of the tunnel of austerity”.

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