IMF admits to misjudging economic performance

21 April 2017
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As the government hailed official figures putting last year’s budget surplus eight times the size of the target set by Greece’s international creditors, a key International Monetary Fund official on Friday conceded that the organization underestimated the resilience of the Greek economy once again.

“The number that came out this morning is well above what we have been projecting, what anybody has been projecting,” the head of the IMF’s European department, Poul Thomsen, said, referring to a primary budget surplus for 2016 worth 3.9 percent of gross domestic product, as announced by Greece’s statistics service ELSTAT.

Thomsen, who was the Fund’s envoy to Greece at the height of the crisis, said the IMF would send experts to Athens next week to help finalize a package of measures agreed between eurozone finance ministers.

Addressing a press conference in Washington on Friday, Thomsen said he may have overestimated the impact on the Greek economy of capital controls imposed on Greek banks in the summer of 2015.

However he stressed that it will take several years and many reforms for Greece to return to pre-crisis levels.

As for negotiations on Greece’s third bailout, which are to resume next Tuesday, Thomsen said he was optimistic. He stressed that a deal must be reached within two months to ensure that Greece makes good on repaying debt due to mature in July.

He reiterated the Fund’s condition for backing the third bailout – that the country’s debt be restructured.

In a related development, the IMF’s managing director, Christine Lagarde, said she had “constructive” talks with Greek Finance Minister Euclid Tsakalotos who is in Washington for the Fund’s Spring Meetings.

“We had constructive discussions in preparation for the return of the mission to discuss the two legs of the Greece program: policies and debt relief,” Lagarde said.

Back in Athens, government spokesman Dimitris Tzanakopoulos, said yesterday’s announcement by ELSTAT had vindicated the coalition. “Any reservations by the IMF about the country’s fiscal course were groundless and excessive,” he said.

He added that the over-performance of the budget last year boded well for the enforcement of “countermeasures,” aimed at easing the impact of austerity, in 2019 and 2020.

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