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Business

IMF, EU warn of risks despite Greek progress to tackle debt

Text by News Wires

Latest update : 2010-08-05

Greece still faces "key challenges" in fighting its public finance crisis, despite making "considerable progress" across a wide front, EU and IMF auditors said on Thursday.

AP - Greece has made considerable progress implementing an austerity program to tackle its debt crisis and is expected to receive the second installment of rescue loans next month, the IMF and EU said Thursday.  They warned, however, that the country still faces significant risks and challenges.

Greece came to the brink of defaulting on its mountain of debt in May, and was saved by the first installment of 110 billion euros ($145 billion), three-year package of rescue loans set up by the International Monetary Fund and by other EU countries using the euro currency.

In return, it has been pursuing a strict austerity program which has seen it cut civil service pay, trim pensions and increase taxes. The government’s progress has been under quarterly review by the IMF, ECB and EC.

“Our overall assessment is that the program has made a strong start,” said a joint statement released by the IMF, European Central Bank and European Commission.

All end of June targets had been met, they said, “led by a vigorous implementation of the fiscal program, and important reforms are ahead of schedule. However, important challenges and risks remain.”

Athens hopes to receive the second installment of loans  - 9 billion euros ($11.8 billion) - by Sept. 13.

IMF official Poul Thomsen said that although approval by IMF, ECB and Commission headquarters was needed to release the funds, Greece was likely to receive the next installment.

“I’m definitely confident that we are going forward with this disbursement,” he said during a joint news conference.

Athens received the first loan installment, worth 20 billion euros, in May.

“The program is indeed off to a very strong start but as expected there are pressure points,” Thomsen said, adding that there was “clearly a need to control extra budgetary expenses,” including in state hospitals and at the municipal level.

Servaas Deroose, a representative for the European Commission, said major reforms, particularly in the pension system, were ahead of schedule.

“The program has made remarkable progress,” he said, but added that there was “a need to consolidate the progress of the first half.”

Date created : 2010-08-05

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