IMF chief Christine Lagarde (AFP Photo/Cristobal Bouroncle)
IMF chief Christine Lagarde defended her organization’s pessimistic outlook for the Greek economy, saying Wednesday the fund must be the “ruthless truth teller” even if some do not like the analysis.
The International Monetary Fund and Greece are at odds over the outlook for the troubled European nation’s economy, a split that likely will continue to hold up further IMF financing.
Greece Finance Minister Euclid Tsakalotos said the IMF report on the economy, released Tuesday, “fails to do justice” to his country by underestimating growth and the progress made through years of sacrifice.
But Lagarde said following a speech that the fund in the review of the Greek economy “tried in full honesty to be those ruthless truthtellers” despite the criticism.
The reports highlighted that despite a “massive effort” by the Greek people some of the reforms are incomplete, including changes to the pension and income tax systems, where too few people bear most of the tax burden, she said.
“Somebody can ask me the question three times over, I will still say the same thing.”
The IMF said Athens is relying on overly optimistic calculations for its estimates of growth and budget.
The central focus of the dispute is whether Greece can deliver a primary balance, or budget surplus before debt repayments, of 3.5 percent of GDP, far in excess of the 1.5 percent the IMF says is feasible. Trying for the higher surplus “will take a toll on growth.”
Months of bickering have delayed progress on Greece’s 86-billion-euro ($92.4 billion) bailout program agreed in 2015. European officials insist on IMF participation, and the IMF will not lend more unless the country’s long-term debt is sustainable.
The IMF warned that Greece’s debt will become “explosive” in the long run, and insists the country requires further substantial debt relief and realistic budget targets.
But Tsakalotos, in a letter responding to the IMF assessment, said the argument that “Greece cannot sustain high fiscal surpluses that surpass 1.5 percent of GDP is in contradiction to recent developments.”
The fund data “rely neither on the most recent evidence of fiscal performance nor on the most up-to-date evidence on the ability of the Greek economy to produce fiscal surpluses,” he said.
But Lagarde said the country’s reform program “had not yet delivered the benefits that were expected in order to unleash the forces of the Greek economy.”