Greece: A Credible Deal Will Require Difficult Decisions By All Sides

iMFdirect - The IMF Blog

blanchBy Olivier Blanchard

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week. At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?

In the program agreed in 2012 by Greece with its European partners, the answer was: Greece was to generate enough of a primary surplus to limit its indebtedness. It also agreed to a number of reforms which should lead to higher growth. In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.

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2 thoughts on “Greece: A Credible Deal Will Require Difficult Decisions By All Sides

  1. Pancho says:

    What IMF chief economist Blanchard fails (or refuses) to understand is that the Greek pension system isn’t just about retirees. It is a replacement for all kinds of missing – more specific and individualist – social security systems as they are existing mainly in protestant, Northern European countries.
    Early pensions are a surrogate for deficient security systems for the unemployed, disabled, or ill. Grandpa’s pension is shared within the family to help the daughter pay down their home loan, or to help the grandchildren go to university.

    You can’t axe pensions unless you offer full-scale social security replacements. It might be worth it in a medium term. But even if the Greek public wants to go down that road, it constitutes an incredibly complex and lengthy project. Syriza can take a few steps and balance out the side effects before moving forward. Certainly not what the IMF wants them to do, but then again: it’s the IMF.

    More about Greek pensions:
    http://www.nakedcapitalism.com/2015/06/did-the-media-and-greece-miss-a-meaningful-concession-by-the-creditors.html

    Like

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