Tuesday , June 22 2021

IMF: "The new Memorandum for Greece to Come – Reduce Tax Exemptions Take Other Measures"



More than seven months have passed since the supposed "exit" of the memorandums, and the IMF has already announced that Greece will be forced to re-introduce another memorandum despite the fact that it borrowed from the markets because it sees more risks of excluding the Greek economy, court decisions on the memorandum for reducing pensions and abolishing gifts in the country

It adds to the entire election uncertainty and the cancellation of the memorandum interventions in its first post-memorial report for our country.

The IMF wants to draw up a precautionary plan to address fiscal threats to judicial decisions, to apply the cut-off of the 2020 tax-free limit in order to reduce direct taxes and revise the adaptability of sectoral contracts.

At the same time, he criticizes the increase in the minimum wage and feels vulnerable to the state of the banks, demanding capital appreciation (either through capital appreciation or, given the lack of demand for stock, using non-disadvantage instruments) and give priority of measures to reduce "red" loans without state aid before considering the possibility of using state aid.

The baseline scenario of the report forecasts primary surpluses of 3.5% of GDP by 2022, followed by a primary surplus of 3% in 2023 and 2.8% in 2024, noting that Greece intends to repay early its debt to the Fund. However, the technocrats of the IMF devoted a special part of the negative scenario in which Greece will have difficulty meeting its financial needs from 2021 and will need drastic fiscal measures, debt restructuring or new financial support, a new Memorandum!

The report estimates a possible budgetary cost of court decisions of 9.4 billion euros (4.9% of GDP) for retroactive payments, and the additional annual budgetary burden estimated at 1.5 billion euros (0.8% of GDP ).

IMF technocrats acknowledge that "the economic recovery in Greece is accelerating and expanding," that "the debt repayment capacity is sufficient" and that "the government's financial needs remain viable in the baseline scenario," but they add that "there are still weaknesses and declining risks "and that" if certain financial risks are confirmed, the repayment capacity may face challenges in the medium term. " In this context, they identify five key risks:

1. Reforms with past reforms (high risk, with chances of 30% to 50%): Reforming fatigue can slow down structural reforms or lead to cancellation, especially due to political pressures ahead of the upcoming elections. Court decisions to annul a memorandum may be an avalanche.

2. Deterioration of trust in banks (medium risk with probabilities of 10% -30%): Delays in balancing the balance of banks can dramatically worsen the investment climate and deposits.

3. Lower return on domestic demand (medium risk with probabilities of 10% -30%): Higher than the projected negative effects of high primary surpluses on growth and investment delays as a result of political uncertainty are likely to stem the recovery of domestic demand.

4. Rough worsening of global economic conditions (high risk with a probability of 30% to 50%).

5. Increase international protectionism by strengthening trade wars (high risk with a probability of 30% -50%).

The basic recommendations

The IMF continues to provide medium-term medium-term growth in Greece, which in the medium term is marginally above 1%, and again recommends applying the tax cut without limitation in 2020 in order to create a space for reducing the tax rate of income of natural persons business profits.

In addition, the Fund again recommends greater flexibility in the labor market, reforms for further opening of product markets and strengthening of the business and investment climate. In addition, as expected, it opposes a new settlement of debts to the state in many installments.


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