FinMin Tsakalotos: ‘We hope the IMF will become more reasonable’

Finance Minister Euclid Tsakalotos welcomed the European Parliament’s stronger involvement in monitoring the financial assistance programme for Greece, he told Economic and Monetary Affairs Committee MEPs in an economic dialogue meeting. “We need an honest broker, representing different views from different political perspectives, to examine the economic and social impact of the programme”, he said, referring to the new EP working group on macro-economic adjustment programmes.

Tsakalotos said that Greece’s strategy is to finalise the ongoing review of the current programme as quickly as possible, as he fears that delays will make planned reforms, such as those in the pension system, harder to sell. “The institutions left Greece on 5 February with the promise they would get back to us in ten days. But we are still waiting. We have no time”, he said. Greece is currently negotiating a new tranche of financial assistance.

IMF’s pension demands “unreasonable”

The pension reforms are a particularly hot potato for Greece. Tsakalotos explained that early retirement arrangements are being reduced and that his government is now working to merge 300 different pension funds into one overall fund with common rules for all. “This is a very radical reform”, he stressed. He criticised the International Monetary Fund (IMF) for insisting on further pension cuts because – in its view – pensions make up too big a share of Greece’s social spending: “The IMF has to realise that it is very difficult to change this at the bottom of the recession. Pensions have already been cut 11 times, leading to a 40% reduction. And what one should realise is that pensions are a form of family income in Greece these days. We hope the IMF will become more reasonable”, he said.

Tsakalotos touched on a variety of reforms his government has to deal with and outlined some differences that still stand in the way of an agreement on a new tranche of financial assistance. “On the fiscal gap the institutions are divided. The IMF asks for additional measures to be taken. Our views are closer to those of the European Stability Mechanism, the Commission and the European Central Bank. At this stage we think that more measures are politically difficult and economically counterproductive. We don’t need more pro-cyclical measures now”, he said.

Development strategy in two months’ time

Asked about the major obstacles on the path to growth and jobs, the minister said that reforming the public administration is his number one ambition “for the good of the economy and Greek citizens”. But, he added, ‘In the development strategy that we will present to the institutions in two months’ time, we don’t stick to just one idea. We have to improve tax collection, increase liquidity for SMEs, and reduce non-performing loans so that the banks can lend money again instead of being ‘zombies’. We need non-systemic banks like Sparkassen and we need to improve the financial sector and interest rates. This will all be in the strategy.”

Refugee crisis in Greece will not change Greek reform goals: Asked about the effects of the refugee crisis on Greece, Tsakalotos said his reform goals would not change as a result of this crisis. “But, if, ex-post, it turns out that there were negative effects, these will need to be recognised”. He also said that the EU Commission’s system of reimbursements for Greece in this area is problematic, as payments often come late, “which is difficult in a country struggling with liquidity” and that he feared that due to low social spending on the Greek population, the refugee crisis might play into the hands of right wing parties.

Photo: EU