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Greece continued to outperform on its tax collection and revenue cutback efforts at the start of the year, with a key measure of the country’s public finances in the black by a €1bn last month.

Latest figures from the Greek ministry of finance show the state’s primary budget surplus grew to hit €1.02bn in January, better than the €1bn recorded in the same period in 2016 and far exceeding a target of €670m.

The left-wing government’s better-than-expected fiscal performance over recent months has emboldened Syriza’s claims that its bailout programme is on track, with Athens disputing the International Monetary Fund’s claims the country cannot meet the surplus targets built into its three-year bailout.

Greece’s primary budget surplus – a measures of the government’s finances and revenues excluding its debt repayments – has become a key battleground in its latest bailout talks.

EU creditors and Athens think the country can maintain a surplus of 3.5 per cent surplus a decade after the bailout ends in 2018, while the IMF has pushed for a lowering of the target after six years in which the country has repeatedly missed its economic forecasts. Latest forecasts from the Bank of Greece expect the surplus to hit 1.75 per cent this year.

In a blog post last night, the IMF’s most senior officials redoubled their warnings about the “heroic” assumptions built into Greece’s €86bn rescue programme agreed in 2015.

Amid doubts over the IMF’s financial involvement in Greece, the fund’s chief economist Maurice Obstfeld and head of Europe division Poul Thomsen repeated that the institution’s rules prevented it from lending to any country whose debt is deemed “unsustainable”.

The EU argues Greece’s low debt servicing costs mean the country’s 180 per cent debt mountain is manageable. The IMF however insists that the overall stock of debt is holding back growth and any hopes that Greece can return to the international bond markets after 2018

“Assessing viability in terms of a country’s ability to re-access markets continues to be relevant when the country is a member of a currency union”, wrote Mr Obstfeld and Mr Thomsen in a blog titled “Dealing with Sovereign Debt”.

“Pretending that unpayable debts can be repaid will only sap the effectiveness of the debtor’s adjustment efforts, ultimately making all parties lose more than if they had promptly faced the facts”, they added.

In its latest budget breakdown, the Greek government said its revenues rose 4.3 per cent on the year to €4.16bn – with corporate taxes rising over 350 per cent, tobacco levies climbing nearly 40 per cent and personal income tax by 2 per cent.

Government spending meanwhile fell by €137m to €3.32bn and better than its target of €3.46bn.

Earlier this week, EU and IMF creditors agreed to send their bailout monitors back to Athens to assess the country’s progress on implementing reforms it needs to unlock its latest round of bailout cash.

Copyright The Financial Times Limited 2017. All rights reserved.
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