Griechenland - Haircut/Default/CDS

In an interview with Kathimerini, the  International Monetary Fund’s chief of the IMF mission for the Greek  economy, Poul Thomsen, has suggested that Greece’s lenders might accept a  move to avoid private sector wage cuts if the government can prove that  other reforms will increase the country’s competitiveness.

Thomsen also stressed the need to restore the balance between  structural reforms and fiscal consolidation, admitting that there has  been too much of an emphasis on fiscal measures so far.

People say that the IMF has changed its view on Greece, become  much tougher, or even given up believing that we can succeed and will  have to leave the eurozone. Is this accurate?

We want Greece to succeed. The cost of leaving the eurozone would be  enormous, in the form of a sharp increase in unemployment and deep  decline in wages, much worse than what we are seeing now. The fact is  that the reforms and modernization of the Greek economy that are needed  to restore competitiveness inside the eurozone are the same as those  needed for Greece to compete in the global economy. Membership in the  eurozone comes with huge advantages that make this modernization much  easier than if you were outside. What the IMF has been saying is that  after a very impressive start, the reform and modernization effort  needed for the economy to become competitive and restore growth have  lost momentum. We need to restore this momentum. There is no  disagreement between us and the Government that reforms need to be  reinvigorated.

What do you think about the strong criticism of Greece from  abroad? It seems to suggest that we have achieved nothing. Are we  incapable of doing what needs to be done?

I share the frustration of many Greek officials that much of the  criticism from abroad overlooks the fact that Greece has done a lot, at a  great cost to the population. While much still needs to be done, Greece  has already come quite a long way. Failing to recognize this, will not  help mobilize support for the program in Greece.

In this regard, I think that officials—myself included—need perhaps  to be more sensitive to ensuring that we send a balanced signal when we  say that the program is off track. While most of the targets and  benchmarks for end-December were missed, this is not that surprising  given the political turmoil during the last quarter of the year, and the  fact that the new Government did had very little time to try to catch  up. We need to resist sweeping conclusions about Greek support for  reforms on the basis of the exceptional circumstance during the fourth  quarter. This being said, reforms were too slow even before the recent  political turmoil. Again, we need to restore the momentum.

Aren’t you concerned that the policies that you are recommending are causing a deep recession?

Yes I am. Recession, decline in wages and rising unemployment are  unavoidable for a country that has to tackle a dual problem of excessive  fiscal deficits and lack of competitiveness—that has to undertake  painful fiscal consolidation and sometimes equally painful reforms at  the same time. This is why the IMF has cautioned against an excessive  pace of fiscal consolidation. While Greece certainly will have to  continue to reduce its fiscal deficits, we would want to  ensure—considering that social tolerance and political support have  their limitations—that we strike the right balance between fiscal  consolidation and reforms. We have argued to go a little slower as far  as fiscal consolidation is concerned and move faster—much faster—with  the reforms needed to modernize the economy. I think that you will see  this reflected in the new program.

Are you advocating wage cuts?

Let me begin by saying what I think we all agree on. Greece still has  a large competitiveness gap. Closing this gap will require actions on  many fronts, not only wages, but it is clear that wages for the economy  as a whole are too large compared to Greece’s productivity. One could  hope to magically raise productivity to levels that will justify the  current wage level. We are trying, but there is a limit to this. Thus,  part of the adjustment must come by more closely aligning productivity  in individual enterprises with wages. Reforms to the wage setting  mechanism, to the system for collective agreements could help in this  regard. I think that most of us agree on what I have said so far. Where  we need to be more convinced, is that such reforms can deliver results  in the foreseeable future. If not, we believe that the government should  consider more direct interventions for a temporary period, until  reforms become effective. These could include limitations on the minimum  wage and possibly the 13th and 14th salaries. We are still discussing  this. It is too early to say. We need to better understand what kind of  reforms the government has in mind.

You have come under personal attack recently. You are said to be the problem.

Yes, this is unpleasant, but not surprising. And it reflects a deep  misunderstanding of how the Fund works. Everything I say here, all the  policy proposals and conclusions that we make during the discussions,  have been carefully vetted by our colleagues in Washington before we  come here. We go through a long and difficult internal review process  where our colleagues take a very critical look at what we are proposing.  This is really one of the strengths of an IMF mission: when senior  officials speak to me, they speak to the IMF. My person is really not  interesting in this regard. But I understand that there is a tendency to  focus on the messenger rather than the message.