Now is not the time to relax the effort,’ IMF’s Lagarde tells Greece

Greece must not relax a fiscal effort that is starting to bear fruit after painful sacrifices, IMF chief Christine Lagarde said on Tuesday as Athens lined up for another creditor audit.

“Now is not the time to relax the effort,” Lagarde told state television NET in an interview recorded last week.

“There are some really positive developments but obviously more needs to be done in terms of revenue collection, in terms of independence of the tax administration going forward, in terms of product and service market reforms,” she said.

“Opening up the product and service market I think would go a long way in attracting investors and making sure that the Greek economy can pick up,” Lagarde said.

After six years in recession, Greece projects slight growth next year, though international officials disagree over whether this is possible. The OECD last week forecast that the Greek recession would continue into 2014, with a 1.2-percent contraction.

Greece’s best hope currently lies in hitting a primary surplus – not including debt servicing costs – in 2014 in order to earn additional debt relief from its European creditors.

Greece last year erased nearly a third of its immediate debt, over 100 billion euros ($130 billion) thanks to an unprecedented write-down agreed with private creditors including banks and pension funds.

Lagarde repeated on Tuesday that debt targets for 2020 and 2022 had to be respected without necessarily resorting to another so-called ‘haircut.’

“I’m not talking about haircuts. I think what is important is to keep in mind the targets. The targets are 2020, 124 percent debt-to-GDP ratio, 2022 under 110 percent debt to GDP ratio,” she said.

A team of experts from the EU, the IMF and the ECB arrive on Tuesday to audit Greece’s finances and decide whether to release more bailout money.

Athens also hopes for EU-IMF approval to lower its general sales tax rate to boost demand during the coming tourist season.

Lagarde noted that though “not trivial,” this move should not undermine revenue collection that is one of Greece’s main fiscal challenges.