The IMF mission chief: Why the new Greek program won’t work

IMF mission chief to Greece says ambitious surplus targets could constrain the economy

By Yannis Palaiologos

The head of the IMF mission in Greece, Peter Dolman, warned that the high primary surpluses Greece must achieve in coming years could compromise the economy’s growth.

In an interview with Sunday’s Kathimerini, the successor to Delia Velculescu said the bailout exit deal at the June 21 Eurogroup does indeed improve “Greece’s prospects for accessing the markets,” in the medium term, but added that primary surplus targets of 3.5 percent of GDP until 2022 and 2.2 percent until 2060 will “constrain the government’s ability to promote growth.”

“As a member of the eurozone, Greece has lost the ability to implement an independent monetary policy. The fiscal constraints mean that there are very few tools left with which to boost economic activity,” he said.

Referring to the 2.2 percent primary surplus target after 2022, Dolman said it will be very challenging to meet the forecasts of the European Commission’s Compliance Report in this fiscal environment. “At this time, we consider the realistic forecast for real growth in Greece is 1 percent annually. Our own research, based on the historical record, shows that a country cannot maintain a positive primary balance above 1.5 of GDP for such a long period.”