IMF to Greece: Reforms Must Come Faster
This seems to be as good of an opportunity as any for Greece to try to exit what has been a long, painful, and ultimately tragic recession.
The International Monetary Fund, one of Greece’s three lenders comprising the ‘troika,’ has scolded the world’s economic problem child once again, telling the struggling country it must reform faster.
Reform has come slowly and painfully in the birthplace of western civilization, where years of socialism and entrenched interests resisted privatization. A culture of clientelism saw an established public economy avoid counting the number of its employees until 2010, and this number excluded those working for public companies, only including the bureaucracies.
But now, with its financial destiny at least temporarily controlled by external creditors, Greece has been pushed into a corner where it must find the will to reform, not only for its own long-term economic health, but to shore up any immediate budget shortfalls.
Greece’s financing gap could be as large as 10.9 billion euros over the next two years, a pressing concern for the IMF, which by their own rules can only pay money to the country if its financial obligations are covered for the next 12 months. Now the organization has voiced its frustration with Greece, as the country continues to receive massive amounts of money from the global community while enacting reform slowly, saying in a statement that country must progress “rapidly on structural reforms to unlock growth and create jobs,” adding that doing so “would lessen the pain of further adjustment.”
The IMF also pointed to the way the Greek economy is currently changing, driven not by large-scale economic reforms, but rather by a contracting economy trying to sort itself out in the midst of a recession. “[Greece] continues to [rebalance] through recession, not productivity-enhancing structural reform.”
Reforms are desperately needed in the country, which include privatizing state-owned industries, drastically downsizing its public workforce, as well as liberalizing many private sector occupations, which are currently throttled by the state. However, the public workforce has been the hardest to shake.
In the face of recent job cuts, Athens has been rocked by union protests and resistance by public employees. However, there seems to no other choice, and the opportunity to remake Greece’s future could become even more real once reforms are instituted.
Since being demoted to ‘emerging market’ status in early June, the country has continued to squabble politically and economically. Still, Constantinos Zouzoulas, an analyst at Athens brokerage Axia Ventures Group, wrote in a note to investors that being an emerging market could attract investors seeking risk, and looking for the promise of high returns.
Should reforms come to the birthplace of Aristotle, foreign investors could give the country a second chance at economic prosperity. The BRIC countries — Brazil, Russia, India, and China — are in the midst of a slowdown, and those with capital will be looking for new places to generate those lucrative returns. Greece will just have to show the world that it can reform, and also overcome political divisions on its way there.
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