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The International Monetary Fund has warned since last spring the Karamanlis government on the need for immediate action to address the imminent crisis, and despite the fact that analysts working for the Fund based on statistics, which are in the process proved false and misleading.
The IMF had written ‘note warning »(Early Warning Exercise), which, like the report of the Task strains Fund then examined the course of Greek economy, when found sharp decline in competitiveness appreciate the evolution of size and risked inviting the Greek government to reduce the deficit and to restrain the rapid growth of debt. Not considered official government forecasts too optimistic, since they reflect reality, but outlining a more positive environment than actually existed, and notes that “the fiscal adjustment can not wait another.” “We sounded the alarm, but not heeded” has the “K” the IMF official.
The then government did not follow the calls of the IMF and took no action, perhaps because of the upcoming elections, while is that the former prime minister had not found a response from the opposition parties which had rejected the call to some understanding necessary measures had been sent by the prime minister on March 6, 2009. Obviously, however, the findings of the Fund played a role in the final decision of Mr. Karamanlis to call early elections because it was unable to take painful measures based on narrow parliamentary majority of one seat.
After the note early warning followed an official report, the original version of which was produced in May and end in June, which found “high fiscal and external imbalances and weaken competitiveness”, highlighting the need for “reforms to boost competitiveness and growth so to avoid slipping into stagflation. ” The executives of the Fund on the spot evolution of the Greek economy have concluded, urging that Greece needed immediately “to enter a path of fiscal adjustment will be based on sustainable measures aimed at reducing the relationship of debt to GDP ‘ . In this context, asking to be paid directly attempt to “increase revenues” and featured “the primary aim of tackling the wage bill and pension programs that rely on a deteriorating structural structure. Indeed, the Government advised to consult the social partners to employers, employees and the public sector “to agree to a three-pronged approach, based on dialogue and transparency regarding objectives and obstacles, to address the serious concerns regarding competitiveness ».
They foresaw a recession in 2009 would range between -1% and -2%, while noting the risk of increasing spreads if they are not directly applicable measures. Features, not a mistake any budgetary aid on the grounds that the strength of the economy was limited. For example, it noted that a substantial subsidy from the car market, applied last spring, the Karamanlis government would not help growth, but they will increase the debt. Furthermore, perceived risk in the banking sector proposed merger of banks, which now supports the governor of the Bank of Greece. The mission was dispatched to Athens, then headed by the Director of the IMF’s Europe, Mr. Traa, who is the Deputy Head of the imminent part of Mr. Thomsen, who led the band who last month negotiated the rescue of the Greek economy . Mr. Traa and his colleagues were consulted in Athens with the Minister of Finance and Economy, Mr. Papathanasiou, the Employment Minister Petralia, the governor of the Bank of Greece, Provopoulos and financial advisers of Prime Minister Karamanlis.
The “memo warning» (Early Warning Exercise) aimed at assessing the risks involved in cases that do not adopt the advice given to IMF projections. It does not attempt to predict crises, but also identifies the shortcomings in the functioning of an economy and the possible moves that could lead to systemic shocks, and often finds policies that lead nowhere, as was the case of Greece.
It also krinonai policies likely to cause problems not only within a country, but may lead to a situation in which to address a need for international cooperation and the involvement of the Fund itself.
The “warning note” is described as part of efforts by the IMF to better monitor and analyze economic and financial aggregates, including the risk of extending a crisis from one country to another or over large areas. The produce managers of the Fund and shall remain confidential in the form of internal document, unlike the reports public, although they usually follow a report that includes many of the labels of note.
Thanasis Ellis
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