Political leaders’ agreement and IMF MD statements provide support to Greece’s efforts

During a roundtable interview held at IMF headquarters in Washington, IMF Managing Director Christine Lagarde noted on Greece that “The IMF never leaves the negotiation table. But we are in Greece at the moment. We are working with the other members of troika and we are engaged in this dialogue with the Greek authorities. There is currently a program between members of the troika and Greece and we work on the basis of that program. There are targets, there are structural reforms, there is a financing, there is a debt sustainability analysis (that is part of that program) on which clearly the Greek authorities are called upon to determine how they will deliver against that program. And that is the strategy”.

Asked to comment on recent reports indicating that austerity package has not worked, she stressed that: “When I look back to the initial program and the achievements of the Greek economy and the Greek population, it’s impressive: 6.5% of deficit reduction since late 2009 is a real achievement. I think there is still a lot that the country can do in terms of revenue, tax collection from those who must pay tax – and you know what I mean. There is a lot more that Greece can do in terms of structural reforms and I would certainly hope that with a better consolidated coalition and with real ownership by the authorities, Greece can actually go further and improve the situation significantly for the good of the population”.

At the same time, political leaders in Greece accepted – despite certain objections – PM proposal for adopting the cost cutting package of €11.5bn as a precondition for the renegotiation. Reportedly, PM stressed during the meeting that any other decision would lead Greece to isolation and may mean its exit from the euro. PASOK leader noted that he believed that Greece should demand an immediate renegotiation adding that “we are not the ones to lead the country to elections. I am forced to accept PM view, because he is the one responsible”. Following political leaders’ meeting, FinMin preannounced a new round of discussions with troika starting tomorrow at 2pm, while noted that the whole package of cost cutting measures may be finalised by the end of August.

Following all recent negative statements and comments by eurozone officials and international media, indicating a complete derailing of Greece’s adjustment program along with an uncertain short-term outlook, IMF MD statements are supportive to Greece’s efforts at this crucial period. A few words of praise for the past and commitment for the future could also have positive side effects on ongoing developments on the political and macro front. Furthermore, political leaders’ agreement alleviates – at least at the moment – a serious concern regarding the cohesion of the coalition parties at the first crash test for the government. The road is still uphill and hard, yet I feel that some small signs of hope have emerged amid a prevailing gloomy outlook.

 

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