“Extremely non viable”! This is how the IMF describes the Greek debt in its review that will be on the Executive Board’s table in today’s meeting. The review basically admits that the Greek debt the should be specific measures in the direction of a debt relief, such as the “locking” of the interest rates at 1,5% for 30 years along with the prolonging of the Greek bonds to 2070.

The IMF underscores that the reduction of pensions so far is 1% of the GDP while the deficit of the pension system is 11%, which indirectly hinds for a new reduction of the pensions.

It also directly challenges the European -mostly German- view that Greece should have primary surpluses of 3,5% for a period of 10 years, as such a goal is unrealistic.

The review underlines the necessity of a tax reduction in parallel with a reduction of the tax free threshold. For the IMF the increased taxation in Greece, being an anti-development policy, can not have long term positive results.

It is noted that 50% of the population is not able to pay on time their obligations to the state, while the total debt of the private sector to the state is almost 70% of the country’s GDP!

Regarding the banking system, the review underlines the fact that Greece has the second higher position in non-performing loans in Europe and regardless of the three recapitalizations, the quality of the capitals is low, putting a new question-mark on tits viability. The review also estimates that there should be a “security” buffer of 10nb Euros for a possible new bank recapitalization probably by 2018.

The IMF estimates a development of approximately 2,7% for 2017 under the condition that the program evaluation will be concluded, Greece will enter the ECB’s QE program and the capital controls are lifted. For 2016 the development rate is estimated to be 0,4%

The report suggests that the development model for Greece should be focused on exports.

The IMF’s suggestion as regards to the Greek debt is that:
– The period of grace should be extended to 2040
– The Greek bonds should be extended to 2070
– The interest rate payments until 2040 should be capitalized and their payment should be prolonged until 2070
– The interest rates should stabilize on low levels no higher that 1,5% for 30 years.

As for the reasons the Greek program is slowing down, the reasons the IMF provides are:
– Reformation fatigue
– Slow recovery of the domestic market demand due to the over-taxation.