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IMF Chief: Security Fund Reforms are Linked to Greek Debt Easing

Lagarde1Greece will need debt relief along with deep security fund reforms in order for the pension system to be sustainable, said International Monetary Fund Managing Director Christine Lagarde.
The IMF head gave a web press conference where she was asked, inter alia, if the Fund is blocking negotiations between Greece and creditors by raising strict demands on security fund reforms.
Lagarde said that the less deep are the pension fund reforms in Greece, the greater the necessity for more debt relief provided by the European institutions.
“I have always said that the Greek program has to walk on two legs: one leg is the one of significant reforms and the other one is a debt relief. We persist on that view if the pension reform cannot be as significantly, substantially deeply reformed as needed, it will mean more debt relief on the other side,” she said.

Lagarde pointed out that no amount of debt relief will actually make the pension system sustainable. Greece currently spends 10 percent of GDP in its annual budget to keep the pension system afloat and this is not sustainable, she said.
“The average in Europe is 2.5 percent of GDP,” Lagarde stated. “So it all needs to add up but at the same time the Greek pension system needs to be sustainable in the medium and long-term, and that requires taking short-term measures now that will last in order to make it sustainable.”
Lagarde denied that the IMF was pushing for “draconian” measures in Greece.
“We have said all along that the fiscal consolidation should not be excessive, so that the economy could continue to work and eventually expand, but it needs to add up,” said the IMF chief.
“The pension system needs to be reformed, the tax collection system needs to be improved so that revenue comes in, tax evasion is stopped, and the debt relief by the other European must accompany that process.
“For this reason, the IMF will be very attentive to the sustainability of the reforms… We want that country to succeed at the end of the day, but it has to succeed in real life, not on paper,” Lagarde concluded.

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