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Friday, January 18, 2013

Thomsen on progress of Greek Program

IMF Survey Magazine (online) published an interview with Poul Thomsen.
The Fund has from the beginning argued for a longer fiscal adjustment period. But we also need to recognize that this requires financing,
an escalating political crisis severely eroded confidence and contributed to a far deeper than expected credit crunch, while structural reforms fell short of targets, slowing external gains.
for the government to avoid further wage and pension cuts—which we agree are not desirable—it is critical that it seriously tackles tax evasion and reduces the size of the bloated public sector as planned
many markets for goods and services in Greece remain protected
If Greece wants to succeed in its adjustment it will have to improve its tax collection.... So this is an area where results have been very disappointing
while international institutions can offer advice in terms of best practice, the people on the ground are the ones responsible for effecting change. The bottom line is that institutional change will take time and strong commitment. In Greece, we’re still closer to the start of the process than to the end. (emphasis added)
On competitiveness
it is unfortunate that almost all the gain has happened through declines in nominal wages as opposed to productivity gains because of the delay in the structural reform agenda. 
All told, Greece has received €50 billion for bank recapitalization and another €120 billion in budget support. These very substantial resources are saving Greece from having to go through even more wrenching adjustment than is currently the case. 

The latest IMF report is here in pdf

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