{
  "title": "Greece: Toward a Workable Program",
  "publication": "IMF Blog, February 11, 2016",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2016/02/11/greece-toward-a-workable-program",
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  "summary": "Author: Poul M. Thomsen.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: Poul M. Thomsen.\n- Date: February 11, 2016.\n- Context: After stabilizing the economy following last summer’s crisis, the government of Alexis Tsipras is discussing with European partners and the IMF a comprehensive multi-year program to secure a lasting recovery and make debt sustainable.\n- Central IMF objective: Help Greece return to a path of sustainable growth that benefits the Greek people through a program of reforms plus debt relief that \"adds up.\""
    },
    {
      "heading": "Debt relief and reform trade-offs",
      "content": "- Key principle: There is an inverse trade-off between the ambition of reforms and the strength of debt relief — a program with less ambitious reforms requires more debt relief, and vice versa.\n- Mutual dependence: \"No amount of pension reforms will make Greece’s debt sustainable without debt relief, and no amount of debt relief will make Greece’s pension system sustainable without pension reforms.\"\n- Political reality: Greece and European partners will face politically difficult decisions; compromises must reflect political constraints within the euro zone."
    },
    {
      "heading": "Why focus on pension reforms",
      "content": "- Persistence of generosity: Despite reforms in 2010 and 2012, Greece’s pension system \"remains unaffordably generous.\"\n- Comparative indicators:\n  - Standard pensions in nominal Euro terms are \"broadly similar in Greece and Germany,\" despite Germany being \"twice as rich as Greece\" by average wage.\n  - Greeks retire much earlier than Germans.\n  - Germany is much better at collecting social security contributions.\n- Fiscal consequence: The Greek budget needs to transfer \"some 10 percent of GDP\" to cover the pension system shortfall, compared to a European average of \"some 2½ percent.\"\n- Sustainability conclusion: The present pension arrangement is \"unsustainable.\""
    },
    {
      "heading": "Fiscal targets, required measures, and credibility",
      "content": "- Medium-term target: Greece’s ambitious medium-term target for the primary surplus is \"3½ percent of GDP.\"\n- Required adjustment: To reach that target, Greece will need measures \"in the order of some 4-5 percent of GDP.\"\n- Limits to alternatives:\n  - Scope to cut other spending or increase tax rates exists but is \"very limited.\"\n  - Most other spending has \"already been cut to the bone\" to protect pensions and social payments.\n  - Failure to broaden the tax base and improve compliance precludes assuming large future tax collection gains.\n- Growth assumptions: It is \"not credible\" to assume Greece can grow out of its debt problem rapidly by transitioning from the lowest to the highest productivity growth within the euro zone.\n- Credibility emphasis: The IMF seeks a \"credible plan\" to reach the medium-term surplus target; over-optimistic assumptions risk reviving Grexit fears and stifling investment."
    },
    {
      "heading": "Social impacts and safety net considerations",
      "content": "- Social hardship: Pension reforms will be \"socially challenging\" given exceptional hardship over \"the past six years.\"\n- Reversals: Social pressures have already forced reversals of course under both the previous and the current government, leaving Greece \"much further away from its medium-term goals than it was in mid-2014.\"\n- Social role of pensions: Pensions have a broader social function in Greece, but using pensions for social protection \"is not a durable solution.\"\n- Recommendation: The IMF argues for \"a modern social safety net that is sustainable over the medium term.\""
    },
    {
      "heading": "IMF stance and conditionality clarity",
      "content": "- Misperception addressed: The IMF did not make participation conditional on \"socially draconian reforms\" of pensions; rather, a program must \"add up\" quantitatively.\n- Flexibility: The IMF is \"willing to work with the combination of reforms and debt relief on which Greece and its European partners can agree,\" provided it adds up.\n- Near-term support: The IMF does not want draconian fiscal adjustment in an already severely depressed economy and has argued for a fiscal path \"more supportive of recovery in the near term and more realistic in the medium term.\"\n- Overarching message: Difficult choices on reforms and debt relief are necessary to ensure that Greece’s efforts over the last six years are not wasted.\n\nPoul M. Thomsen, February 11, 2016.\n\n---\n\n Content in this bundle\n\n- Ελλάδα: Προς ένα Εφαρμόσιμο Πρόγραμμα - Από τον Πάουλ Μ. Τόμσεν\n  - Ελλάδα: Προς ένα Εφαρμόσιμο Πρόγραμμα - Από τον Πάουλ Μ. Τόμσεν (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Ελλάδα: Προς ένα Εφαρμόσιμο Πρόγραμμα - Από τον Πάουλ Μ. Τόμσεν (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- عربي\n\nSource: https://www.imf.org/en/blogs/articles/2016/02/11/greece-toward-a-workable-program"
    }
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    "Authors: Poul M Thomsen",
    "Published: February 11, 2016",
    "Author: Poul M. Thomsen.",
    "Date: February 11, 2016.",
    "Context: After stabilizing the economy following last summer’s crisis, the government of Alexis Tsipras is discussing with European partners and the IMF a comprehensive multi-year program to secure a lasting recovery and make debt sustainable.",
    "Central IMF objective: Help Greece return to a path of sustainable growth that benefits the Greek people through a program of reforms plus debt relief that \"adds up.\"",
    "Key principle: There is an inverse trade-off between the ambition of reforms and the strength of debt relief — a program with less ambitious reforms requires more debt relief, and vice versa.",
    "Mutual dependence: \"No amount of pension reforms will make Greece’s debt sustainable without debt relief, and no amount of debt relief will make Greece’s pension system sustainable without pension reforms.\"",
    "Political reality: Greece and European partners will face politically difficult decisions; compromises must reflect political constraints within the euro zone.",
    "Persistence of generosity: Despite reforms in 2010 and 2012, Greece’s pension system \"remains unaffordably generous.\"",
    "Comparative indicators:",
    "Fiscal consequence: The Greek budget needs to transfer \"some 10 percent of GDP\" to cover the pension system shortfall, compared to a European average of \"some 2½ percent.\"",
    "Sustainability conclusion: The present pension arrangement is \"unsustainable.\"",
    "Medium-term target: Greece’s ambitious medium-term target for the primary surplus is \"3½ percent of GDP.\"",
    "Required adjustment: To reach that target, Greece will need measures \"in the order of some 4-5 percent of GDP.\"",
    "Limits to alternatives:",
    "Growth assumptions: It is \"not credible\" to assume Greece can grow out of its debt problem rapidly by transitioning from the lowest to the highest productivity growth within the euro zone.",
    "Credibility emphasis: The IMF seeks a \"credible plan\" to reach the medium-term surplus target; over-optimistic assumptions risk reviving Grexit fears and stifling investment.",
    "Social hardship: Pension reforms will be \"socially challenging\" given exceptional hardship over \"the past six years.\"",
    "Reversals: Social pressures have already forced reversals of course under both the previous and the current government, leaving Greece \"much further away from its medium-term goals than it was in mid-2014.\"",
    "Social role of pensions: Pensions have a broader social function in Greece, but using pensions for social protection \"is not a durable solution.\"",
    "Recommendation: The IMF argues for \"a modern social safety net that is sustainable over the medium term.\"",
    "Misperception addressed: The IMF did not make participation conditional on \"socially draconian reforms\" of pensions; rather, a program must \"add up\" quantitatively.",
    "Flexibility: The IMF is \"willing to work with the combination of reforms and debt relief on which Greece and its European partners can agree,\" provided it adds up.",
    "Near-term support: The IMF does not want draconian fiscal adjustment in an already severely depressed economy and has argued for a fiscal path \"more supportive of recovery in the near term and more realistic in the medium term.\"",
    "Overarching message: Difficult choices on reforms and debt relief are necessary to ensure that Greece’s efforts over the last six years are not wasted.",
    "**Ελλάδα: Προς ένα Εφαρμόσιμο Πρόγραμμα - Από τον Πάουλ Μ. Τόμσεν**",
    "[عربي](http://blog-montada.imf.org/?p=4012)"
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      "title": "Ελλάδα: Προς ένα Εφαρμόσιμο Πρόγραμμα - Από τον Πάουλ Μ. Τόμσεν",
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