IMF “debt” warning to Greece
The International Monetary Fund (IMF) warned that if negative risks arise, Greece’s capacity to repay its debt could be compromised, requiring more support from its European partners.
In the statement made by the IMF, the pioneering findings of the audit on the Greek economy within the scope of the Article 4 consultation were shared.
In the statement, which pointed out that the coronavirus shock interrupted the economic recovery of Greece, it was noted that the country’s economy contracted 7.9 percent in the first half of this year.
“The economy is expected to shrink by 9.5 percent in 2020 before gradually recovering in the medium term,” the statement said. was evaluated.
The statement stated that significant uncertainties and downside risks continue to cloud the outlook of the Greek economy, and the long-term epidemic accompanied by the permanent decline in global tourism significantly worsened the outlook, but the availability of the vaccine and its rapid distribution could help recovery.
A new wave of NPLs may emerge
In the statement, it was stated that if the supports and controls for the banking sector loosen, a new wave may emerge in the problem of non-performing loans.
“If significant adverse risks arise, the public’s capacity to repay its debt could be jeopardized, requiring a strong circular fiscal regulation or more support from European partners,” the statement reported that Greece’s medium-term public debt repayment capacity remains sufficient. was evaluated.
In the statement, it was mentioned that various support measures will mitigate and delay the impact of the epidemic on banks, but it was emphasized that a comprehensive strategy remains a priority to address long-standing weaknesses.
The statement pointed out that the structural reforms are continuing, and it was noted that these reforms should be accelerated in areas that can be implemented reliably.
4. What is an item consultation?
According to the IMF’s founding agreement, each member country must be regularly audited within the framework of the “Article 4 Consultation Study”.
The IMF conducts detailed reviews (usually once a year) on the economic developments of each member in order to guide the economic administrations of the member countries and to fulfill their oversight role on the international financial system.
Since these studies are carried out under Article 4 of the IMF Foundation Agreement, they are called “Article 4 Talks”.
The assessments made by the IMF delegations within the framework of the Article 4 Talks are submitted to the IMF’s Board of Directors in Washington for approval.