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IMF's Thomsen cites needs for major reforms throughout Greek economy, society

Δημοσίευση 10 Δεκεμβρίου 2010, 08:42 / Ανανεώθηκε 27 Ιουνίου 2013, 14:55
IMF's Thomsen cites needs for major reforms throughout Greek economy, society
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Drastic social insurance reform, major changes in the job market, deregulation of all professions and reform of public utilities were the top proposals cited on Thursday by the IMF mission’s chief for Greece Poul Thomsen, who addressed an event hosted by the American-Hellenic Chamber of Commerce on Thursday.

Drastic social insurance reform, major changes in the job market, deregulation of all professions and reform of public utilities were the top proposals cited on Thursday by the IMF mission’s chief for Greece Poul Thomsen, who addressed an event hosted by the American-Hellenic Chamber of Commerce on Thursday.

Thomsen clarified that Greece’s efforts are still at an early stage, “which is the hardest”, as he said, adding that until now all goals have been met. However, he insisted that the huge public sector will have to be reduced in size and called for deep structural reforms.

He also referred to the four key-points in the restructure effort namely, the public utility companies, spending cuts, tax collection, health / social insurance. He stressed that reform is a

political and social issue and not strictly economic, adding that drastic social insurance reform is necessary as well as major changes in the job market sector, deregulation of all professions and public utility reform. He clarified that the memorandum measures were decided by the Greek government and that the IMF does not demand wage reductions.

He pointed out that a lot of effort is still needed in order to have economic growth, stressing that this fact makes him feel disappointed with the absence of political consensus in the implementation of the memorandum. He also called on the business sector to offer its assistance to this historical effort made by Greece.

Earlier, speaking at an Economist conference in the seaside resort of Kavouri, Thomsen stressed that reduction of Greece's fiscal deficit and the economy's recovery require the advancement of a "critical mass of reforms".

He added that Greece is at a crossroads, saying it must carry out simultaneous reforms at many levels, such as in tackling tax evasion and curbing wasteful spending in the wider public sector.

"Today we are counterbalancing the shortfall in tax revenues with further cuts in public expenditure, but this cannot go on indefinitely," he warned.

The recovery of the Greek economy, which under the stabilisation program is anticipated in end-2011, has as a prerequisite the existence of additional structural changes, Thomsen said.

The IMF official said that significant achievements have been made in reducing the country's deficit, which reached 6 percent of GDP, and in the structural changes, the chief of which was the reform of the pension system.

Commenting on criticism of the recession in the Greek economy in the first year of the stability programme, Thomsen noted that recession has been observed in every country in the world where a huge fiscal adjustment was required with change of the currency parity.

He attributed the disappointment that arose to the lack of wider political support of the stabilisation program and the impression created that magical solutions existed.

Thomsen also stressed that reductions of salaries and pensions in order to further reduce Greece's fiscal deficit cannot continue.

"The government had great courage and drastically limited the salary cost. But we cannot continue reducing salaries and pensions indefinitely," he said, adding that "Greece must learn to be taxed, and the waste in state enterprises, many of which give salaries much above the average salary, needs to be reduced".

The IMF official also said that the problem of reducing the deficit is not only an economic but also a political one, noting that a broader political consensus is needed to advance the program and for it to continue to be socially acceptable, adding that in order for that support to be maintained, it is very important that fiscal adjustment is effected through fiscal reforms.

Thomsen said that the next reforms being advanced by the government, such as the opening of the closed-shop professions and deregulation of the economy, will be very difficult from a technical viewpoint, and for this reason heightened efforts will be required in the coming months.

To a relevant question, Thomsen said that Greece will have a primary surplus and growth as of the end of 2011, and in that way it will control its state debt.