WASHINGTON (Reuters) – The International Monetary Fund is skeptical if Greek reforms under the current euro zone bailout can deliver the fiscal targets set by the lenders, a senior IMF official said on Friday.
Poul Thomsen, who heads the IMF’s European Department, told a news briefing the fund’s own calculations showed that the reforms Greece has undertaken would produce a primary surplus — the amount of money the government has before debt servicing — of 1.5 percent of GDP.
The euro zone’s program, however, expects these reforms to produce a surplus of 3.5 percent, Thomsen said.
“We can support a program that is based on a primary surplus of 1.5 percent. If Greece and its European partners want to agree on a program with a more ambitious fiscal target, we need to see how it adds up,” he said.
“We do not think that the program that is on the table is consistent with more ambitious targets, and I am not talking about targets for next year and the following year, but over the medium term,” he said.
He said the IMF was preparing a Greek debt sustainability analysis (DSA) which it would release in December, along with its regular evaluation of the Greek economy.
“If you want to have a DSA that has a (primary surplus) target higher than 1 .5 (percent of GDP) we want to see the reforms that justify that,” Thomsen said.
He said that while Greece undertook a pension reform, it only reduced the annual 10-11 percent of GDP deficit of the pension system by one percent of GDP.
Athens still had to address the issue of exceptionally large exemptions from taxation of households, which in Greece reached 60 percent, compared to single digits elsewhere in Europe, Thomsen said.
“We think that some of the fundamental reforms in the public sector have still not been undertaken. What we are concerned about is whether Greece will be able to modernize its public sector,” Thomsen said.
“It urgently needs a better social system to target the vulnerable, it needs an unemployment compensation system in order to be able to modernize,” he said.
(Reporting By Jan Strupczewski)