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IMF urges Greece to continue reforms, shore up banks
WASHINGTON, Jan 26, 2019 (BSS/AFP) – In order to sustain hard-won gains,
Greece should continue its economic reform program and work quickly to shore
up its banks, the International Monetary Fund said Friday.
In the wake of the severe downturn, the Greek economy is poised to see
solid growth and job creation this year but the “crisis legacies remain
significant,” the IMF said.
In its first report since the nation exited the IMF loan program, the fund
urged Athens to work quickly to strengthen banks that have a heavy load of
bad loans still on their books.
“To maintain hard-earned competitiveness gains amid rising wage pressures,
Greece should press ahead with its unfinished reform agenda,” the IMF said.
“The authorities’ growth strategy provides laudable high-level objectives
but further measures will be needed to achieve them.”
The challenge facing the country, weary of reforms and belt tightening,
will be to balance the need to improve the government’s fiscal position while
protecting social spending and reducing the tax burden.
The IMF estimates GDP growth of 2.4 percent this year — just below the
government’s own 2.5 percent forecast — but warned that investment growth
“remains tepid.”
Restoring lending, which will be key to boosting economic growth, “will
require swift, comprehensive and well-coordinated actions” to strengthen
banks and promote faster reduction of non-performing loans, which are the
highest in Europe at nearly 90 billion euros ($105 billion).
But the IMF said Athens would have to weigh its plans carefully to gauge
the benefit to banks and the economy and the impact on government debt.
High public debt and a “weak payment culture” complicate the government’s
efforts to boost the economy, and the report called for more actions to
increase competitiveness without raising taxes, including labor reforms and
changes to personal bankruptcy procedures.
However, the government also must prepare a “contingency plan” to deal with
potential shocks from pending legal cases seeking pensions and back wages,
the IMF said.
BSS/AFP/SR/1910 HRS