IMF Sees Greece Missing Target

9/10/213

By Ian Talley and Matina Stevis

Greece is projected to miss a key bailout target for next year according to an International Monetary Fund report published Wednesday, a factor likely complicating already-fraught negotiations over the next tranche of financing for the ailing economy.

The IMF projects in its latest Fiscal Monitor report that Greece’s budget surplus will only hit 1.1% of gross domestic product next year instead of the 1.5% of GDP target outlined in its bailout terms with the IMF and the euro zone.

In the fund’s last review of the emergency financing program, it said Athens was on track to meeting the target. But tax collection problems, anemic growth and ongoing delays in a plan to sell off state assets have plagued the bailout program.

Greece’s emergency creditors – the IMF, the European Commission and the European Central Bank – won’t issue the next round of needed bailout financing if Greece fails to meet its main objectives. The budget targets have become a new focal point in negotiations.

Greek, euro zone and IMF officials paused the latest round of bailout talks to figure out how Athens might hit the budget target and to determine how to fill a shortfall in bailout financing, according to a person familiar with the matter. The mission was suspended for “technical work” in late September and is set to resume in the coming weeks.

The revelation is also likely to give euro zone officials another reason to delay serious talks on reducing Athens’ debt burden. The euro zone, which holds most of Greece’s government debt, vowed to give the country debt relief if the country hit its bailout targets, but declined to say exactly how. Officials in euro power Germany have expressed particular opposition to writing down the value of the debt, which many economists say will be necessary to meet the currency union’s debt-relief vow.

The Greek finance ministry promptly issued a statement on the fresh IMF projections, saying that Greece was complying with fiscal targets and would cover any future gap with further cuts in spending and improved tax compliance.

But the ministry stopped short of committing to fresh austerity measures.

The statement from Athens was unusually sharp, however.

“The Greek government does not comment on reports from international organizations like the International Monetary Fund,” it said, adding that it refrained from commenting “even when this organization accepted [it made] wrong assumptions and wrong estimates in the drafting of the first Economic Policy Program for our country.”

“Talks with our partners to update the program continue,” the Greek finance ministry said in its statement.

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