The Greek government has achieved significant progress in its fiscal consolidation effort in the period 2005-2006 although further deficit cuts are needed, primarily to prepare the country for higher social insurance spending in the future due to an ageing population in the country, the International Monetary Fund said in a report on the Greek economy.

The report recommends that Greece present balanced budgets in the period 2010-2012 and surplus budgets afterwards.

Greece’s growth rate - remaining strong for several years - is expected to remain above the EU average rate, further closing a gap in living standards between Greece and its west European partners. The IMF said the country’s GDP grew 4.1 pct in 2006 and predicted a slight slowdown to 3.8 pct this year due to lower demand and noted risks of further slowdown in the coming years.

The IMF praised a sharp reduction of the fiscal deficit (below 3.0 pct) in 2006 but noted that the Greek economy developed certain vulnerable spots, such as very high credit expansion, persistent inflationary pressure, lower competitiveness and excessive current accounts deficit.

The report underlined the need to reform the country’s pension system. Referring to the Greek banking system, the report said it was generally healthy but recommended that the Bank of Greece be alerted over any over-extended debt burden by Greek households.

Combating tax evasion, reducing red tape, improving efficiency in public enterprises, expanding privatisation, further deregulating markets and more flexible labour markets were top reform priorities for the government, the IMF said.

Source: Athens News Agency

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