IMF report: Greek exit crisis plan on right track, tax evasion remains big challenge

08:50, September 16, 2010      

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Greece has made a strong start in the implementation of a bold Stability and Growth Program to exit the severe economic crisis, meeting targets set so far, said Wednesday a first review report on the progress of the Greek economy by the International Monetary Fund (IMF).

But challenges ahead remain, with facing tax evasion the most significant among them, stressed the IMF report. Since this May, IMF along with the European Union, financially supported the debt- ridden Greece to overcome the crisis that spread fears of a domino effect across the eurozone this year.

IMF experts who examined the state of Greek finance figures in the past few months acknowledged that Greece has made drastic steps regarding fiscal discipline to lower a budget deficit standing at 13.6 percent of GDP last year to less than 3 percent in a three-year period.

"Fiscal consolidation is broadly on track, but there are obvious challenges,"said the report, referring to the need of improvement of the tax collection mechanism, since tax evasion is still widespread in Greece. The credibility of the whole program depends on this in a big percentage, IMF experts stressed, noting that Greek citizens need to see wealthy tax evaders start paying their dues in order to accept austerity measures.

Cutbacks on public expenses so far are within the targets set for this year, balancing deficits in tax revenues, therefore the IMF experts agreed with Greek authorities that for the time being there is no need for additional fiscal measures, said the report.

IMF analysts suggested that Greek government officials should step up major structural reforms though, such as the opening up of closed professions. Foreign experts also suggested for policies to ease bureaucracy, especially in sectors, such as the tourism industry, to boost development, and focus on the privatization of state companies.

Regarding the Greek banking sector, according to the report, the liquidity is tight but adequate for the moment, but the sector needs a restructure strategy to face future challenges.

IMF experts also praised Greek authorities for reforms introduced ahead of schedule, such as the pension system reform.

Finally, they noted that recession is in line with projections, raising attention to inflation which is higher than expected due to tax hikes.

Source: Xinhua


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