The International Monetary Fund tried to be “ruthless truth tellers” in its assessment that Greece needs to pursue further reforms to its pension and tax systems, IMF managing director Christine Lagarde said on Wednesday.
Speaking at an Atlantic Council event in Washington on transparency, Lagarde said that the IMF would not back down from its views on Greece’s economic prospects despite protests from the Greek government that they were too pessimistic.
The IMF said in its first annual audit of Greece’s economy in nearly four years that Greece’s debt was still unsustainable even after years of grinding austerity. It recommended that Greece’s pension system be refocused on supporting the poor, the tax base be broadened and tax rates lowered to help jumpstart economic growth.
In Athens, a government spokesman said the government would not yield to “illogical demands” by the IMF for “precautionary” austerity measures in a European bailout programme that no longer includes IMF money.
Reforms are absolutely needed
Greece’s central bank also disputed the IMF’s prescription that an additional $10 billion in bank capital buffers was needed.
“We tried, in full honesty, to be those ruthless truth-tellers,” Lagarde said of the IMF’s report.
“Yes, we are criticised occasionally and I’m sure that the Greek authorities didn’t like some of the things that we said.”
Lagarde said the IMF acknowledged the pain suffered by the Greek people who have borne the brunt of austerity measures enacted since the first of three Greek bailouts was launched in 2010. But she said too few people, mainly wage earners, were bearing the burden of taxation, while the pension system needed to be made sustainable and better support the poor.
“Reforms are absolutely needed. Somebody can ask me the questions three times over, I will still say the same thing,” Lagarde said.
Greece also needs to further improve its own data transparency, Lagarde said, noting that there were frequent and significant revisions of economic data.
Asked whether data transparency issues were causing divisions among IMF board members over Greece’s debt sustainability and surplus targets, she said such differences were more likely a result of “an assessment of the potential for reforms and the potential for actual economic output from those reforms”.
Asked about the Fund’s view of policy proposals coming from the administration of US President Donald Trump, she said the IMF would evaluate the impact of actual policies that are enacted, not “slogans” or reports about them.
“We need to operate in a reliable, scientific way, in order to shed light on the consequences of decisions made, not decisions that are talked about,” she said.