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Many taboos must fall in Greek society - such as that for the dismissal of civil servants and the privatization of state enterprises. This is the call of the Head of the Mission of the International Monetary Fund for Greece, Poul Thomsen, who gave a telephone press conference for journalists analyzing the Greek economic crisis. The economist admitted that the program for financial stabilization is undoubtedly difficult and requires sacrifice. Poul Thomsen is expected to arrive in Athens in the last week of August to prepare the next, the fifth IMF report on the status of the Greek economy.

The fourth report was published today and it recognizes that the open discussion for the involvement of private lenders in the second bailout actually convinced the markets that Greece will proceed to restructure its debt. This is the expectation of 95% of the investors. The spread reached 2650 basis points and the three credit rating agencies put Greece close to insolvency: Standard & Poor's - CCC, Moody's Caa1 and Fitch - B+. Today, Fitch announced that the agency will further downgrade Greece within hours and the country will fall into the junk category.

However, Poul Thomsen refused to comment on whether the idea of involving private lenders did play a bad joke of Greece actually, nor he wished to state what haircuts would make the debt serviceable. He said that the discussion about the involvement of private lenders has been running for more than a month and while the cards are on the table he could not comment.

The IMF report states that the adverse external economic environment adds to the disturbing national situation - a jump in unemployment, which reached 16% in March, despite the slight improvement of the industry due to external procurement, the overall economic development is in decline. Competitiveness is improving due to the reduced cost of labour but productivity is falling. The current deficit is about 10.5% of GDP, the exports are growing but on a small base.  

Poul Thomsen stated explicitly that the fiscal program largely met its objective, but Greece will not reach economic growth only by fiscal means. Structural reforms are needed too because without them, Greece will not be able to service its debt. This is the only way Greece to restore its competitiveness in the euro area.

The high spread and the growing outflow of deposits increased the pressure on Greek banks, the only source of funding of which is the European Central Bank. Contrary to the expectations of the IMF, the Board of Directors of the Bank still has not decided whether to approve the new tranche of securities worth 30 billion euro, which the state guarantees. The bank profit is under strict pressure. The three largest Greek banks reported a sharp drop in the revenue in 2010 and the first quarter of 2011. Their subsidiary banks in southeastern Europe only partially offset their poor performance nationally. Bad loans reached 18%.

The banks increased their capitalization, but their market value is very low due to their greater exposure to government securities. The pressure on the banking system leads to a continuing reduction in household borrowing and business loans increase insignificantly, mostly the short-term trade credits.

Poul Thomsen said that the IMF has completed about half of its financial commitments to Greece under the financial stabilization program and promised that it will fulfill the other half in the next two years. Until then, there will be no discussions on the possible involvement of the IMF in the second bailout to Greece, which the European Union leaders are currently considering.