24/7 Wall. St.
February 14, 2011
The debate over the fate of Europe’s poorer nations continues to return to Greece. It has become the canary in the coal mine as capital markets investors and other EU nations contemplate the region’s sovereign debt problems.
A team of IMF analysts recently visited Greece and they temporarily approved the continuation of financial support to Athens. They also attacked the pace at which the Greek government is restructuring its economy. Greek officials said the IMF was premature in seeking faster reform. But, the IMF analysis is likely to be right. The same advice would probably extend to Ireland and even Portugal. For now, Greece has additional time to straighten out its fiscal affairs even though its recovery can easily be pushed off course.
“Approval of the conclusion of the third review will allow the disbursement of €15 billion (€10.9 billion by the euro area Member States, and €4.1 billion by the IMF),” the report said. “The government must ensure that reforms are sufficiently ambitious and comprehensive to tackle the deep seated structural challenges facing Greece.”
The subtle message is that the Greek government has begun to relapse into habits which caused its original problems. Greece has not cut its spending enough and is not aggressive enough about collecting taxes.
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