Greece: Toward a Workable Program
By Poul M. Thomsen
Posted on February 11, 2016 by iMFdirect
Posted on February 11, 2016 by iMFdirect
Having successfully pulled Greece from the brink last summer and subsequently stabilized the economy, the government of Alexis Tsipras is now discussing with its European partners and the IMF a comprehensive multi-year program that can secure a lasting recovery and make debt sustainable. While discussions continue, there have been some misperceptions about the International Monetary Fund’s views and role in the process. I thought it would be useful to clarify issues.
It is argued that the IMF has made its participation dependent on socially draconian reforms, especially of the pension system. This is not the case. Ultimately a program must add up: the combination of reforms plus debt relief must give us and the international community reasonable assurances that by the end of Greece’s next program, after almost a decade of dependence on European and IMF assistance, Greece will finally be able to stand on its own. This implies an inverse trade-off between ambition of reforms and strength of debt relief—we can certainly support a program with less ambitious reforms, but this will inevitably involve more debt relief.
