IMF agrees stand-by arrangement with Greece

21 Jul 17

Greece has gained approval in principle from the International Monetary Fund for a €1.6bn stand-by arrangement.

It can take effect only if the IMF receives “specific and credible assurances” from Greece’s European partners to ensure debt sustainability, and if Greece’s economic programme remains on track. The arrangement will expire on 31 August 2018.

IMF managing director Christine Lagarde said: “I strongly welcome Greece’s new economic adjustment programme, which focuses on policies that will help restore medium-term macroeconomic stability and growth, and supports the authorities’ efforts to return to market financing on a sustainable basis.”

She said the agreement would give Greece a breathing space in which to mobilise support for the deeper structural reforms needed for the country to prosper within the euro area.

Recent measures to broaden the income-tax base and reform pensions spending were critical to rebalancing Greece’s budget toward more growth-friendly policies, Lagarde said.

“Rehabilitating the financial sector is essential to restoring credit and fostering growth,” she explained.

“The new programme will support efforts to reduce Greece’s exceptionally high non-performing loans by strengthening the debt restructuring legal framework.”

Banking supervisory authorities should undertake an updated asset quality review and stress test to ensure that banks were adequately capitalised before the end of the programme, the fund urged.

Lagarde concluded: “Despite progress on the structural front, Greece’s overarching challenge remains the liberalisation of restrictions that impair its investment climate.

“Thus, the authorities should reconsider their plans to reverse cornerstone collective-bargaining reforms after the end of the programme, and should instead focus on redoubling efforts to open up still protected product and service markets, so as to facilitate investment and create new jobs.

“They should also redouble efforts to protect the credibility of the statistical agency and guarantee its independence.”

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