Velculescu: Greek debt still unsustainable even with absolute fulfilment of program

29 June 2017
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The head of the IMF mission chief in Greece, Delia Velculescu, echoed the Fund’s standing position of a need for a full implementation of reforms by the Greek side, including measures that in most cases lead to pension cuts.

The IMF technocrat spoke by video-link to participants at an Economist conference in Athens on Wednesday.
She reiterated, in fact, that the social security deficit in Greece is some four time higher than the rest of Europe, before again pointing to the IMF’s “recipe” of expanding the tax base in the bailout-dependent country instead of relying on the “preferred” method of past Greek governments, namely, high tax rates.

In a rare public praise of Athens, Velculescu nevertheless said policies now followed are more “growth friendly”, therefore a reduction in taxes and higher social support spending is possible.

Turning to an issue that continues to bedevil the IMF and European creditors as far as the Greek program is concerned, she said even the absolute implementation of reforms in Greece will not render its debt as sustainable.
She added that a solution for the debt must be based on realistic assumptions, underlining that the Fund still believes that Greece cannot post primary budget surpluses exceeding 1.5 percent (of GDP) on an annual basis, and at the same time reach average GDP growth rates of 1 percent.

Speaking in person at the same conference, the European Commission’s mission chief to Greece, Declan Costello, echoed the Commission’s more favorable view of the situation vis-a-vis the Greek program, referring to “major progress”. He said this development was significant for the debt’s sustainability, another Commission position that veers from the IMF’s view.

Conversely, in a comment with a double meaning, Costello said Greece has now returned to the point where it was in 2014, while repeating Velculescu’s words of implementing all measures.

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