The Hellenic Radio (ERA): News in English, 09-05-25

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From: The Hellenic Radio (ERA) <www.ert.gr/>

CONTENTS

[01] IMF Recommendations on Greek Economy

The mission projects growth between -1 and -2 percent in 2009 with a recovery beginning late in 2010. IMF specialists suggest that necessary policy adjustments are inevitable to correct the fiscal and external imbalances. Delaying adjustment could lead to extended slow growth. Thus, Greece needs a comprehensive medium-term policy program that will include radical reforms in state sector targeting at boosting transparency, reform in Social Security System, freeze of taxes to households and businesses and tackling of tax evasion to bolster confidence and boost potential growth.

The mission's policy recommendations include:

-promotion a tri-partite social contract between employers, unions, and the public sector, aimed at more cooperative bargaining to favor employment growth over income growth -Efforts should focus on income that escapes taxation; broadening tax bases by reducing exemptions and deductions -It advises against income transfers to high income groups. -Iimplementing the EU Services Directive to liberalize professional services, retail trade, and other activities that can significantly lower production costs -continue restrictive hiring policies to shrink payroll.

The mission projects the headline deficit to widen and public debt to increase sharply. With current information and the growth outlook, and if no further measures are taken, it estimates a deficit of at least 6 percent of GDP in 2009, rising to over 7 percent in 2010.

The mission recommends annual adjustment of about 1½ percent of GDP in permanent measures beginning in 2010. This adjustment is required to place the debt ratio on a downward path by 2012. The authorities should resist pressure to grant favors to special interest groups or specific sectors, which may become stronger with weak economic conditions.

Structural reforms need to assist the recovery and boost the economy's growth. So IMF recommends: -Acceleration of privatization of public enterprises to limit losses and public indebtedness -Facilitation of more part-time work to boost participation of youths and women in the labor force -Taxation of the self employed and the informal sector increasing further selected excise taxes to the euro-area average -Suspension of the corporate and personal income tax rate cuts of 1 percent a year through 2014 until the deficit is confirmed to be below 3 percent of GDP. -Acceleration of the implementation of the new IT and accounting systems. Targets for this reform need to be quantified and published.

Source: Greece: 2009 Article IV Consultation, Concluding Statement of the Mission: http://www.imf.org/external/np/ms/2009/052509.htm

News item: 22773

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