IMF's Man Says Greek Rescue Plan May Fail

 
ATHENS – The International Monetary Fund’s representative in Greece has warned that a $152 billion bailout of rescue loans may not work because he said the country’s leaders are dragging their feet on critical structural reforms. The IMF, along with the European Union and European Central Bank form the so-called Troika which is providing the bailout funds, in return for waves of punishing pay cuts, tax hikes, slashed pensions and the layoffs of scores of thousands of workers.
Despite those austerity measures, Poul Thomsen said the effort may yet fail. “Greece is at a crossroads. It is clear the program will not work if the authorities do not take the path that requires much stricter structural reforms than those that we have seen so far,” Thomsen said in an interview with the  German Sunday paper Welt am Sonntag. “It is going two steps forward, and one backwards,” he complained. “The Greek government understands that many of the most difficult changes lie ahead. At the same time, the political and social fatigue is growing.”
As Greeks have taken to the streets in sometimes violent protests against the measures, Thomsen said he was stunned by the ferocity of the resistance.  “People express their frustration sometimes in very unpleasant ways,” he said. “That is one of the ugly aspects of my work. And the intensity of it here is new for me.”

His troika colleague from the European Commission, Mattias Mors, also criticized the slow pace of reforms. “The Greeks believe it is enough to make laws,” he told the same newspaper. “But it takes time to implement. And often the right structures are lacking, for example in tax administration.” The Troika has complained since the bailout loans began 18 months ago that Greece has done virtually nothing to go after tax evaders costing the country nearly $40 billion a year in tax evasion while the working class, poor and pensioners are being pummeled.
The pessimistic assesment comes as Greece is desperately awaiting a next loan installment of $11 billion that has been delayed until the Troika is satisfied with the pace of reforms. Finance Minister Evangelos Venizelos said the country will run out of money in mid-November and be unable to pay workers or pensioners without the funds.
Besides long-delayed privatization of state-run enterprises and the sale or lease of state properties designed to raise $71 billion, the government of Prime Minister George Papandreou is being criticized for not doing enough to insure greater revenues for 2013 and 2014, falling short in its plan by $8 billion, Troika officials have said, adding that Papandreou has also failed to end monopolies in a number of professions with significant political clout, such as lawyers, architects, and engineers, as well as taxi and truck drivers and pharmacists who have little competition.
The IMF also denied a statement by the Greek goverment that the next loan installment is a done deal. A senior Troika official told Reuters that the inspectors were likely to give the green light to the aid but that it was not assured. The EU and IMF first want to receive more details on the implementation and impact of plans announced last month to slash the public sector workforce and increase taxes to plug a bigger-than-targeted fiscal gap, the official said.
Greece recently said it would miss its 2011 deficit targets set as a condition of aid, also weakening chances the country could get a second bailout of $157 billion agreed on in July by leaders of the Eurozone, countries using the euro as a currency. Greece’s crisis threatens to undermine the union. EU leaders will meet in Brussels on Oct. 17-18 to discuss revising the July 21 deal to provide Greece with a second rescue package. They may ask investors to accept losses on their holdings of Greek debt even larger than the 21 percent write-down set out in the July deal. Reuters reported that a leading member of German Chancellor Angela Merkel’s Conservatives told a newspaper that Greece was near bankruptcy and must give up part of its sovereignty to obtain the large debt forgiveness it needs to survive.