ATHENS, Greece — The International Monetary Fund said Greece had made “exceptional” progress in stabilizing its economy and remains on course to emerge from a near six-year recession in 2014, despite missing targets to ax state jobs and the threat of a $14.6 billion gap in bailout financing.
In a 207-page report published Wednesday, the Washington D.C.-based institution also cautioned that Greece needs to make major structural reforms so its economy can grow in the long-term.
Greece’s coalition government is struggling to meet staff reduction targets in the large public sector, and is due to announce details later Wednesday of its plan to suspend up to 25,000 employees on reduced pay by the end of the year. Though some will then be transferred, the government admitted that some won’t find a new job and will be fired.
The IMF report follows the payment of the latest 2.5 billion euro installment of bailout loans to Greece from its European partners, in addition to which the fund contributed some 1.7 billion euros. However, one IMF Executive Board member from Brazil abstained from approving the IMF payment, claiming in a statement that “recent developments in Greece confirm some of our worst fears” and that “implementation has been unsatisfactory in almost all areas.”
The country has been surviving on rescue loans from the IMF and other eurozone countries since 2010, when it lost access to long-term debt markets. Austerity measures demanded in return for the $319 billion bailout program have hammered the economy and seen unemployment surge to 27 percent. Greece’s annual economic output is around a fifth smaller than when it entered recession in 2008.
“The fiscal adjustment remains exceptional by any international standard,” the IMF said.
The IMF described the country’s privatization program as being “painfully slow” and expressed concern that mass staff transfers and firings planned in the public sector may not have the desired effect.
Poul Thomsen, the IMF’s mission chief in Greece, said he was confident the recession would end soon and that eurozone countries would make good on their pledge to provide Greece with additional debt relief after Athens balances its state budget.
“I have no doubt we will see a bottoming out of recession next year, early next year. I am still confident,” Thomsen said.
In Wednesday’s report, the IMF also predicted the bailout program would fall short of Greece’s needs by 4.4 billion euros ($5.84 billion) next year and by 6.5 billion euros ($8.63 billion) in 2015. The IMF — describing the expected shortfall as a “test of European support” — said that finance ministers from the 17 euro countries have already begun discussions on plugging financing gaps.