IMF says Greece must move faster on reforms

Wed Dec 14, 2011 4:56pm EST
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By Ingrid Melander and George Georgiopoulos

ATHENS (Reuters) - The International Monetary Fund stepped up pressure on Greece on Wednesday, saying promised reforms were behind schedule in most areas and the delays were stalling recovery from years of recession.

Greece, crushed under debt amounting to some 160 percent of gross domestic product, has been dependent on international support to keep paying its bills since an escalating financial crisis shut it out of bond markets last year.

Poul Thomsen, deputy director of the IMF's European department, said Athens could not rely on more tax increases and blunt across-the-board spending cuts, but needed to look at "taboos" that could include laying off more state workers.

"Greece needs to consider more aggressively closing down redundant state enterprises and entities, and it might have to accept in the process involuntary redundancies," Thomsen, who heads the IMF's mission to Greece, told a conference in Athens.

The comments underline the size of the challenge facing Prime Minister Lucas Papademos as he grapples to pass another round of bitter austerity measures before early elections tentatively scheduled for February.

"Both fiscal consolidation and structural reforms are needed in order to improve the investment climate and to create the conditions for economic recovery," Papademos told the conference.

He said Greece's recession would be worst in 2011, and the economy could return to growth in 2013. But he cautioned that Greece's future in the European Union depended on making progress with reforms.

The IMF expects the Greek economy to contract by 6.0 percent in 2011 and by 3 percent in 2012, in what would be its fifth year of a recession that has slashed living standards and forced the most painful reforms since World War Two.   Continued...