Eurogroup’s Dijsselbloem questions ‘outdated’ IMF outlook on Greece
We’ll send you a myFT Daily Digest email rounding up the latest EU economy news every morning.
The head of the eurozone’s finance ministers has questioned the International Monetary Fund’s latest assessment of the Greek economy, claiming the country is performing better than its latest set “dismal” forecasts predicts.
Following the IMF’s latest healthcheck on the Greek economy – where it warned of “explosive” debt dynamics – Jeroen Dijsselbloem said he was “surprised” by the Fund’s grim outlook, suggesting it was based on an “outdated” view of the Greek economy.
His comments lay bare the rift between the Washington-based Fund and EU creditors over the health of the Greek economy following a longstanding tussle over the budget targets and debt relief attached to its €86bn bailout programme.
In an interview with the Netherlands’ RTLZ, Mr Dijsselbloem said he would “like to have the IMF on board but they must be honest”.
“The IMF has asked for big sacrifices from Greece, including budget cuts”, said the Dutch finance minister.
“Greece has already had four quarters of economic growth and has a pretty good recovery at the moment”, he said.
The IMF said “some directors favored a surplus of 3.5 per cent of GDP by 2018″ – a target which other officials have said the economy cannot maintain over the next decade without a major dose of new austerity measures from the Syriza government.
IMF forecasts show the surplus will hit just 1 per cent this year despite Greece’s impressive efforts to ramp up tax collection and cut back spending.
Athens today rejected the IMF’s claims, saying fresh demands on the government were “illogical”.
Greek bonds came under heavy selling pressure on Tuesday, with the country’s short-term two-year yields climbing to their highest level since September at 9.2 per cent.
Although nearly 80 per cent of Greece’s outstanding debt is held by its creditors in the EU and IMF, rising yields reflect souring investor sentiment towards Athens’ bailout, hampering Syriza’s claims it will be able to return to finance itself on the debt markets by the end of the year.
Discord within the Fund and between its partners in Brussels and Berlin raises fresh questions about the IMF’s financial involvement in Greece’s rescue agreed in the summer of 2015.
As it stands, the Fund still deems Greece’s 180 per cent of GDP debt mountain to be “unsustainable”, preventing it from lending further money to the country under its creditor rules.
After six years of bailouts, Greece is expected to grow by 2.7 per cent this year according to the IMF’s latest forecasts, accelerating sharply from just 0.4 in 2016.
The IMF is due to make a final decision on its participation when finance ministers meet in Brussels on February 20, with Mr Dijsselbloem insisting the IMF was “still committed” to the Greek programme.
“Managing director Christine Lagarde has said so. The IMF remains ready to help the Greeks”, he added.
Get alerts on EU economy when a new story is published