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IMF Questions its Handling of Greek Crisis

Although Greece has met the terms of its second bailout when it comes to delivering spending cuts and altering labour laws, the level of the nation’s public debt remains a significant concern. According to the International Monetary Fund concerning debt levels and a series of ‘notable failures’ in the handling of the nation’s fiscal crisis on their part continue to hinder economic recovery.

In a report published yesterday the IMF commented on the first Greek bailout, highlighting its own errors in judgement: ‘Not tackling the public debt problem decisively at the outset or early in the programme created uncertainty about the Euro area’s capacity to resolve the crisis and likely aggravated the contraction in output. A delayed debt restructuring also provided a window for private creditors to reduce exposures and shift debt into official hands.’ The loss of 30 per cent of deposits in the nation’s banking system was also referred to.

The report went on to state: ‘If investors are not persuaded that the policy for dealing with the debt problem is credible, investments and growth will be unlikely to recover as programmed. Should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, and strong programme implementation by the Greek authorities notwithstanding, a more front-loaded approach to debt relief would need to be considered.’

Although no recommendation was made for further budget cuts to be implemented in the foreseeable future the IMF did assert that there should be no easing up on existing taxes, as ‘there is no evidence yet of the sustained expansion in investments necessary for a robust recovery to get underway.’

In a separate report compiled by the IMF if Greece is to reach its debt-reduction goals further relief will need to be supplied by European nations.

The Euro climbed back above 1.31 against the US Dollar but is likely to experience significant movement today as the European Central Bank issues its rate decision. German factory order data and US initial jobless claims will also be of interest.

Euro (EUR) Exchange Rates As of 09:00 –

The Euro/US Dollar Exchange Rate is currently in the region of: 1.3113 >

The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8497 <

The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.3837 >

The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6568 >