The IMF and Greece

The IMF has commented that whilst Greece has made real progress in rebalancing its economy, it has made virtually no progress in improving productivity. The rebalancing has come at the tremendous cost of a fall in output of 25% from its peak in 2007. Greece is seriously lagging in its commitment to privatisation, liberalising regulated professions, and on judicial and labour market reforms. Part of the problem is that the severity of the recession has increased resistance to reform. Greece is caught between a rock and a hard place as reform is easiest to implement in a time of growth but is most needed when the economy is depressed. Whilst the cyclical outlook is improving, it is not at all clear that Greece can move into a period of sustained growth.