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IMF and EU ready to take over Greek economy

13 December 2009 / 11:12:11  GRReporter
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IMF and the EU are planning for serious intervention in the conducts of the Greek economy. Experts from both organizations say it is only a matter of time that the country will be unable to provide for debt acquittal and will count on help from abroad. The mechanism of the assistance will resemble currency board but is yet to be more precisely defined. With its know-how concerning problematic economies, the IMF will assume the role of a manager; the European Central Bank will have a major role in the mechanism as well. This mechanism is the one that Georgeos Papandreou was referring to during Thursday announcement that because of the crisis the country is facing the threat of losing its national sovereignty. IMF’s interference in Greek economy was also the topic of discussion at the meeting between Papandreou and the chief executive of the financial institution Dominique Strauss-Kahn.

Papandreou’s visit in Brussels last week turned out quite upsetting for his European partners showing that the Premier can be just as stubborn, unreasonable and populist as his father Andreas Papandreou. Recommendations aiming at stabilizing Greek economy and conducting painful reforms on the way of handling national debt were pointedly disregarded by the Prime Minister, shocking the Union. Papandreou was directly presented the facts- unless measures are taken, the country will follow Ireland’s fate- freezing salaries and pensions in the public sector and reducing those exceeding €2000.

Instead of facing reality as it is, the Greek Premier is determined to adopt reformations defined by European Financial Experts as “an experiment with questionable results.” Papandreou’s plan? - increase in taxes, direct and indirect, and dealing with corruption. Even experts from his team agree that measures for reduction in public expenses should have already been taken. During series of statements on various topics that Greek bankers made last week, the experts spoke in favor of reducing all salaries in the public sector and not only those exceeding €2000. Otherwise the country’s public finances would collapse, creditors will step away, debt obligations would not be met and the IMF will have to take over.

Although admitting that regaining the trust of financial institutions is Greece’s number one priority, Papandreou’s socialist government doesn’t seem to be working in this direction. On the contrary- Papakonstantinou himself declared banks and credit rating agencies’ analyses conspiracy aiming at destroying the Greek economy. Amid mutual accusations, interest towards Greek public bonds has dropped dramatically. The papers are considered extremely high-risk; the Fitch credit rating agency has reduced Fortis’s rating because it owns Greek public bonds.

Fiscal issues are not the only concern of financial experts in the Eurozone. The insurance reform the Socialists are preparing does not include Greek private insurance agencies. Loverdos’s proposals are considered “vague” and not applicable in the bankruptcy facing Greece with its flourishing corruption and black labor market, as it would be in Norway or Denmark for example. The changes introduced by Socialists are far from pulling the country out of the insurance crisis it is going to face in 2015, provided no serious measures are taken immediately.

Tags: Papandreou reforms crisis IMF EU economy
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