Greece Debt still not fixed, may about to explode in three weeks IMF says

[OmniConsUme]

[QUOTE]Despite decisive action proposed by the International Monetary Fund to ease Greece's financial burden, more turbulence lies ahead for the debt-ridden European nation, reveals the latest IMF report, which was delivered to the Fund's board members for consultation. CNBC has received the report through a close source to the IMF.

According to IMF deputy spokesman William Murray, the report will be discussed at the IMF's board meeting on Feb.6.

Among the reforms they are pressing are further cuts to pension programs and an increase in income taxes.

Without a substantial pace of reforms, Greece will be unable to narrow the gap in its real per-capita income relative to the euro zone and remain prosperous and competitive. This has prompted the euro zone's finance ministers to demand that Greece proceed with these necessary reforms until Feb. 20 or risk the IMF dissolving support of the Greek financial program.

The new, stringent rules

In the latest report, the IMF claims the Greek banks have a weak capital structure and are exposed to the risk of nonperforming loans. The Greek banks' current strategies require a reduction in the aggregate nonperforming loans ratio to 48, 42 and 34 percent by 2017, 2018 and 2019, respectively, but these backloaded NPL reductions "do not appear consistent with the Greek authorities' ambitious investment and growth assumptions."

Among the measures included in the IMF report is the push to rebalance the policy mix toward growth-friendly and equitable policies and to lower the threshold of tax-free income. "Greece's revenue yields lag behind peers as high marginal tax rates applied on narrow bases encourage tax evasion, discourage labour participation in the formal economy and provide incentives for firms to relocate to low tax neighbouring countries," the IMF report said.

In addition, the IMF supports a further reduction to Greece's pensions, which in recent years have fallen by 40 percent. The report stresses that "while recent pension reforms have helped address expected long-run pressures from population aging, pensions for current retirees remain unaffordably high." At this point, the IMF is very critical, claiming that "the Greek authorities did not see a need to reduce pension spending or the income tax credit."[/QUOTE]

[URL="http://www.cnbc.com/2017/01/27/greece-must-step-up-reforms-or-risk-losing-imf-support.html"]Source[/URL]

IMF is also released a damning report ot the Eurozone fiscal Policy. [URL="http://www.imf.org/en/Publications/WP/Issues/2017/01/30/Fiscal-Politics-in-the-Euro-Area-44601"]Report[/URL]

[Sableye]

huh so squeezing blood out of a rock didn't work after all? well bring in the press, we're going to have to try harder next time, it aint like the IMFs own policy arm has actually denounced austarity and the feirce opposition to writeoffs

[AlienCreature]

[QUOTE=Sableye;51762043]huh so squeezing blood out of a rock didn't work after all? well bring in the press, we're going to have to try harder next time, it aint like the IMFs own policy arm has actually denounced austarity and the feirce opposition to writeoffs[/QUOTE]

Austerity is not the problem, and the way that it is portrayed outside Greece is completely biased. You could wipe all of Greece's debt today, no catch, no questions asked, and we would still end up in a dark hole of despair within a decade or two. There are many critical issues that must be resolved if we ever want to stop being Europe's pauper, and most of them involve taking measures that would be considered political suicide over here.

Over several decades, all of our governments have used money from EU grants and taxes to buy the votes of the populace and stay in power. Handing out money is a very popular pre-election tactic over here, and the two political parties that dominated Greece's politics since the junta was ousted (New Democracy and PASOK, both fiscally left parties that only differ in social liberalism/conservatism) spent every dime of the funds we were given to build infrastructure on building a corrupt powerbase at the state's employ. Need a few votes up north? Open up a useless public service that does nothing, and then hire a few dozen highschool dropouts, who can then tell their families to vote for you. One of the cancerous lesions of my country is that state employees can not be fired. Ever. Public servants have been caught defrauding the government by using forged diplomas, and all they got was a laughable fine and some 'reeducation' before being simply reassigned to another service. As a result, decades of worthless 'workers' that produce no valuable goods or services have accumulated, and we are paying for it.

For years, the EU and the IMF have demanded that we clean up our house and lay off everyone whose position does not serve a productive purpose, and use the money to either cut taxes (the absurd levels of which, combined with the regulations, have chased almost all business and investment away) or fund sectors that actually need money, like healthcare. See, a lot of people see metrics about the size of our public sector per capita, and they say 'oh it's not that bad' - the problem is that most of the public sector is functionally useless, and consists of shuffling papers around and looking busy without actually putting any effort in. Regulations are made to keep the 'workers' busy (and I use that term very liberally) and back the monopolies of those with ties in the government. The Greek public sector isn't too big, it is too big [I]in the wrong areas[/I], because it is those hives of decadence and corruption that are the most well-protected from criticism, usually under the auspices of the local communist party. The fastest way to shut down the entire capital under the force of a thousand strikes is to threaten to [I]audit[/i] a public service. Not to fire anyone, not to cut funds, but to [I]examine if the money you are paying into the public sector is being used properly[/I]. Politically, trying to streamline the public sector is suicide. Between the people who benefit from it directly (public servants), their families, and the millions enjoying lavish state pensions that they never paid for - a subject that I will get to in a moment - the fate of this country in every election is decided by who can promise the most absurd, unfeasible handouts.

Another travesty is our public pension system. It was abused for decades and sustained by aggressive taxation and borrowed cash, and there are huge numbers of 'pensioners' who retired at the ripe old age of 40 at ~5000 euros a month. These are not isolated discrepancies, but a pattern, in which anyone who happened to have connections in government raided the public coffers. Because taxing individual citizens more is politically unpalatable, the employers were made to foot the cost, forcing them to move their business to nearby EU countries like Bulgaria and leading to a catastrophic death spiral. More businesses close under the burden of paying for a nation of leeches, so taxes have to be raised on the rest to sustain it, and more close or leave. Our governments have repeatedly refused to sanitize our economy, instead offering fiscally equivalent measures (read: taxes) that look good in Excel, but end up damaging the economy further.

Greece is sick, and reducing its debt is like treating cancer with [I]just[/I] surgery. It will just grow back, bigger and meaner. What Greece needs is aggressive chemotherapy. Yes, the debt should be reduced, but only [I]after[/I] we make the essential reforms that will prevent it from growing back - which is what everyone has been trying to get us to do since the crisis started - but our political order cares only about maintaining its seat, and to them, going bankrupt and being tossed out of the Euro is a [I]good thing[/I]. It will let them run the country like their own personal soviet fiefdom, styled after other unfortunate states like Venezuela. Our enemy isn't the IMF, or the EU, it is our own leaders and the caste of opportunists that vote for them.

tl;dr Greece's debt needs to be lowered, yes, but only after the economy has been completely revamped. Lenders should absolutely not trust any Greek politician's promises, and rely strictly on results instead of guarantees. The EU, Germany and the IMF have been deliberately demonized in and out of Greece to discourage making those reforms.