One of Greece’s Troika of lenders the International Monetary Fund, on July 29 will decide whether to to release its current commitment of 1.8 billion euros ($2.39 billion) and reportedly wants more pay cuts and curtailing of worker rights as a way to make Greece more competitive with countries that pay even less.
The IMF is reviewing what it calls labor market flexibility, language the institution uses to mean workers get reduced salaries and fewer protections in the workplace. Greece has already cut the minimum wage and is phasing out collective bargaining rights on the ordrs of the Troika, which also includes the European Union and European Central Bank.
In its new report, the IMF recognizes the “significant progress” of Greece, underlying the “reforms” in the labor market, however it stresses that new interventions are required in order to increase competitiveness, recommending new salary reductions and new overturns in the remaining labor rights.
The agency projects that Greece will need 32 years to reach the Eurozone’s average levels of “economic self-sufficiency,” but that even in 2045 Greece will be a deficit country regarding its external liabilities.
The IMF requires further strengthening of the labor market flexibility, further reduction of labor costs, as well as restriction of the social security contributions in a fiscally neutral way.
The agency said that the ECB may have to proceed to further cuts in interest rates and to launch a new round of unconventional monetary easing. As regards the Eurozone, the IMF reported that the current fiscal adjustment measures may reduce this year’s growth rate by 1.25%.
the IMF estimates that there won’t be recovery in the Eurozone before 2014, noting, however, that according to the recent reports that business activity is enhanced, giving cautious optimism for the return of the Eurozone to development.
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