IMF warns Greece on fiscal goals

City A.M. Reporter
The IMF has given Greece a sharp warning that its drive to shore up its troubled finances would fail unless it sharply accelerated reforms.

European finance ministers broke a taboo this week and acknowledged for the first time that some form of restructuring might be required to ease Greece's debt burden, which at 150 per cent of GDP is among the highest in the world.

They have said they could ask private creditors to agree to a voluntary extension of the maturities on their Greek debt but have also made clear that the priority is to ensure an acceleration of Greek reforms.

"The programme will not remain on track without a determined reinvigoration of structural reforms in the coming months," Poul Thomsen, an IMF envoy who is monitoring Greek economic progress, told a conference in Athens.

"Unless we see this invigoration, I think the programme will run off track," he said, in one of the strongest warnings to Greece since it sealed the rescue one year ago.

Prime Minister George Papandreou's government has struggled to rein in rampant tax dodging and is under acute pressure to begin selling off state assets to help Greece meet fiscal targets tied to last year's €110bn (£96bn) EU/IMF bailout.

Under its rescue terms, Athens is charged with reducing its budget deficit to 7.6 per cent of GDP this year.

Thomsen said that without further measures Athens would not be able to get it much below ten per cent.

The euro struggled to hold onto gains against the dollar and the cost of insuring Greek debt against default rose amid ongoing talk of a restructuring.

Eurozone ministers have not spelled out how what they refer to as a "reprofiling" of Greek debt would work. Convincing private holders of Greek bonds to voluntarily accept later repayment could be difficult and require costly guarantees to avoid a hit to banks.