The budget will be rewritten in May

“No more cuts, collect as many taxes as possible and proceed with privatizations”. This is the message sent by the IMF from Washington after the announcement for the issuing of the 4th installment of the 4,1 billion euros (14,6 so far).

In his statements following the announcement, John Lipsky, IMF No2 (after Strauss-Kahn) and First Deputy Managing Director and Acting Chair, laid the foundations for the memorandum revision in May, when the Troika auditors will come to Athens once again. His “commandments” are as follows:

“Further progress has been made toward the economic program’s objectives. Output remains close to the targeted path, underlying inflation remains low, unit labor costs are falling, and significant fiscal adjustment is under way. Overall, a measure of stabilization has been achieved.

“Greater emphasis on underlying reforms will be needed during the period ahead. While the 2010 fiscal target was met, the strategy of under-executing the state budget to offset revenue shortfalls and overspending at sub-national levels cannot be sustained.

“To help put the fiscal adjustment on a firmer foundation, it will be important to complete a medium-term budget strategy by May. Ensuring a fair distribution of the adjustment burden remains paramount, and the dialogue with social partners in this process is welcome. Implementation should begin during 2011 to address a projected budget gap. In parallel, the government should redouble its efforts to combat tax evasion and control spending, especially at the local government level.

“To support the recovery, structural reforms need to be deepened. Legislation to deregulate professions needs to be fully implemented, as do reforms pertaining to collective bargaining and the pension system. Important next steps include reducing administrative barriers to exports and formulating a strategy to unlock potential in the tourism sector.

“The government’s commitment to scale up its privatization and real estate development program is timely. More efficient use of state assets will support the fiscal adjustment efforts, promote growth and employment, and help Greece retire maturing debt.

“The financial system remains stable, and time will be provided to allow banks to deleverage and restructure in an orderly fashion. Capital support through the FSF remains available to viable banks if necessary.

And as an epode: “The authorities are to be commended for their commitment to this ambitious program, which will help Greece return to growth and prosperity”.

However, the government finds allies in its effort to exit the crisis among its European partners, too. After the council of the Finance ministers in Brussels, Jean-Claude Juncker said that “many finance ministers were impressed” by the timing and the extent of the reforms presented by Papakonstantinou.

But they were also impressed by the severity with which our country gets downgraded by the rating firms and so discussed and agreed to the Greek minister’s call for a coordinated response which, as Jean-Claude Juncker said, is «extremely urgent».