After an International Monetary Fund (IMF) report found that Greece was making progress in overhauling its public finances and competitiveness, the government was left to explain why there’s been little change in public administration and the failure to go after tax cheats.
Writing at the end of a review of the Greek fiscal adjustment program, IMF staff said that Greece’s consolidation had been “exceptional by any international comparison” and that the country had achieved “a significant dent in its competitiveness gap.”
However, they also highlighted the slow pace of change in terms of tax collection and the public administration. “Very little progress has been made in tackling Greece’s notorious tax evasion,” the IMF said in a statement. “The rich and self-employed are simply not paying their fair share,” inspectors said, despite repeated promises by Prime Minister Antonis Samaras that he would make them do so.
The officials added that labor market reforms had “only to a very limited degree been reflected in lower prices” due to barriers to competition. They also said that “the over-staffed public sector has been spared (job losses,) because of a taboo against dismissals” while the private sector has a record 27.2 percent unemployment rate caused by rounds of pay cuts, tax hikes and slashed pensions.
The Washington-based organization called on the coalition, led by Samaras’ New Democracy Conservatives and including the PASOK Socialists and tiny Democratic Left (DIMAR) to deliver “deeper political commitment to tax administration reform” and to carry out some “mandatory redundancies” in the civil service rather than relying on “voluntary attrition.”
The government said it will meet demands from the Troika of the European Union-IMF-European Central Bank to fire 15,000 workers over the next two years – but will hire 15,000 people in their place, keeping a New Democracy-PASOK tradition of hiring workers in return for votes and relying on retirements to bring down the overall numbers of workers.
The IMF said there was “no more room for tax increases or major cuts in discretionary spending.” It also voiced its opposition to “attempts to artificially engineer growth” through development banks, tax-free zones and subsidies targeted at specific sectors. This appears to be contrary to the government’s hopes of reducing the Value Added Tax (VAT) in the food service sector.
The report identified Greece public debt as being too high and said that its Eurozone partners will need to live up to their commitment to provide “additional relief if needed.” So far, the Eurozone has not identified what this might be and all talk of an official sector debt restructuring has been rebuffed.
The IMF’s statement was issued a couple of days after Finance Minister Yannis Stournaras told a German newspaper that Greece had overcome the worst of the crisis.