IMF official: Greece must shift focus on reform

IMF official: Greece must shift focus on reform

PanARMENIAN.Net - Debt-laden Greece and its international lenders must focus less on deficit reduction and more on reform because there are limits to what society can tolerate, a senior IMF official said on Wednesday, February 1, Reuters reported.

With a long-awaited debt swap deal with private sector creditors almost secured, Athens' focus is now squarely on its 130-billion euro bailout talks with the IMF, the European Union and the European Central Bank - its public-sector lenders collectively known as the troika. Structural reforms and spending cuts are the main sticking points in the negotiations, which the EU and Greece want to complete by the end of this week. If they fail, Greece will plunge into a chaotic default that may spill over to other debt-laden countries such as Italy and Portugal.

"We will have to slow down a little as far as fiscal adjustment is concerned and move faster - much faster - with implementing reforms," Poul Thomsen, the head of the IMF's inspection team for Greece, said in an interview with newspaper Kathimerini.

More reforms and slower deficit reduction would be a policy shift compared with the country's first 110-billion euro bailout, which relied heavily on tax increases and less on spending cuts and which some economists blame for social unrest and the country's worst post-war recession. Despite an unprecedented tax onslaught, Greece has been consistently missing its deficit targets. Its budget shortfall is expected to have narrowed slightly last year to 9.6 percent of GDP from 10.6 percent in 2010.

However, some analysts said Thomsen's suggested policy switch would not work unless Greece's lenders, including the IMF, increase their aid for Greece above the 130 billion euro mark.

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