Greece has defied the doom-mongers -Now the IMF must do its bit



Alexis Tsipras en el Finantial Times:

“Grecia ha desafiado a los profetas del desastre, ahora el FMI deberá hacer su parte”

Last October the International Monetary Fund predicted that the Greek economy would experience a contraction of -2.3 per cent of gross domestic product. Instead 2015 was a year of stagnation, with a contraction of -0.2 per cent. This puts the economy in a better position in terms of achieving future fiscal targets. Indeed, in 2015 Greece overshot several crucial targets: public revenue collection over-performed by €2bn; banks were recapitalised with only one-fifth of the available funds earmarked to this end; the annual unemployment rate dropped from 26.5 per cent in 2014 to 24.9 per cent; and industrial production index recorded a 3.3 per cent increase in November 2015 — the highest in the eurozone. Greece also led the way in terms of the absorption of EU structural funds, with an absorption rate of 97 per cent, while tourism broke records with approximately 26m arrivals and €15.5bn of revenues. Few could doubt, therefore, that 2016 would mark a turning point for our economy and society. After six years of deep and prolonged recession, during which the economy lost a quarter of GDP, Greece is now laying the foundations for a sustainable and inclusive recovery. It is doing so with a credible programme of fiscal adjustment and a commitment to remedying chronic institutional pathologies that, for decades, have been the source of multiple distortions and social inequalities. This is not an easy task. Although the fiscal path is much milder and much better designed than in previous adjustment programmes, Greece faces difficult choices and delicate policy trade-offs in an uncertain global economic environment. At the same time it is in the front line of the principal challenge facing Europe today: the refugee crisis. A major immediate milestone for setting Greece on track to sustainable economic recovery is the quick completion of the first review of the European Stability Mechanism programme. In many ways, this is key as it deals with most of the fiscal and financial measures that the ESM programme contains. And our government is eager to complete it soon. To this end, we have reached agreement with all the European and international institutions monitoring the bailout on the size of the fiscal package that needs to be phased in over the next two years in order to meet the primary balance target of 2018. The package contains a set of permanent measures, the most prominent of which are an ambitious reform of income tax and a major overhaul of the Greek pension system. The income tax reform is designed to yield additional revenue of 1 per cent of GDP, while the pension reform will deliver savings of 1.5 per cent of GDP by 2018 and further savings after that. The Greek government is also committed to bringing in long overdue legislation to strengthen the fight against the illegal trading of tobacco and fuel, as well as permanently improving the ability to collect VAT. The result will be a significant broadening of the tax base and improved compliance. It will also restore fairness to the tax system. The income tax reform has three aims: yield, simplicity and progressivity. Indeed, it will simplify the tax system and significantly reduce the incentives for evasion. It will also deliver the fiscal yield that we agreed with the institutions and, importantly, distribute the costs of fiscal adjustment in a socially fair way, requiring more from those who have relatively more to contribute. Greece fails to understand why the IMF insists in changing the design of the reforms in a way that leaves their yield and simplicity intact, but makes the reform significantly less progressive, shifting a considerable share of the burden on to the relatively poor. Our government was reelected with a mandate to meet the twin objectives of fiscal discipline and credibility, on the one hand, and inclusion and social fairness, on the other. Our ambition, indeed our yardstick for success, is to design new tools and to shape policies that will deliver these objectives in the context of an interdependent economic environment, and with respect to the tight fiscal constraints we face. Our income tax reform is a good example of what we are aiming for. Delaying the conclusion of the first review of the ESM programme by stubbornly insisting to ignore the letter and the spirit of the agreement does not serve the principles on which Europe has been thriving. But I trust that in the next few days the review will be concluded. And I am confident that 2016 will mark a social and economic watershed for Greece, restoring the pride and optimism of its people and making the country an example of inclusive and sustainable growth.

Por Alexis Tsipras

Publicado en Finantial Times

14/04/2016


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