The International Monetary Fund has released the latest installment of Greek emergency loans, and lauded the country's cost-cutting progress. The IMF also warned of tough times ahead for Greece, and debt-laden Ireland.
The IMF has released the latest tranche of cash for Greece
The International Monetary Fund on Friday released a 2.5 billion euro ($3.3 billion) installment of loans for Greece, and praised the country's progress with stringent austerity measures, while also warning of tougher times to come.
This was the latest tranche of the country's 110 billion euro loan package that rescued Athens from bankruptcy in May; so far Greece has received 10.58 billion euros from the EU and the IMF.
Athens had to embark on a series of strict spending cuts to qualify for the loans.
"The Greek authorities are to be commended for their determined implementation of difficult and ambitious macroeconomic policies and structural reforms," senior IMF official Murilo Portugal said. "Inflation is falling and competitiveness improving … [the] overall fiscal adjustment to date has been impressive."
However, the changes have come at a price, recognized both by disgruntled Greeks protesting the cuts, and by the IMF's economic experts.
The organization warned that a cocktail of recession, high interest rates and draconian budget cuts would cause the country's economy to shrink by 3 percent in 2011, more than originally predicted. The IMF also said Athens must do more to accelerate structural reforms, particularly in the tourism, retail, and labor markets.
The Greek government this week announced its latest cost-cutting drive, a plan to raise seven billion euros by selling or otherwise monetizing state companies and other assets.
The capital Athens was gripped on Wednesday by sometimes violent protests against the austerity drive.
"Significant risks" to Irish rescue plan
It's not just Irish Prime Minister Brian Cowen who's taking hits
In a separate report on Ireland, the IMF said Dublin faced major risks that could ultimately jeopardize its ability to repay emergency loans provided by the EU and IMF.
"There are significant risks to the program that could affect Ireland's capability to repay the Fund," the IMF statement, published on Friday but pre-dated, read.
Weaknesses in the banking sector and the possibility of further government rescues of major corporations are among the greater Irish concerns, as well as the chance that Dublin's ambitious four year savings plan might drive the struggling economy into a prolonged downturn.
The organization also predicted that the country would not be able to meet an EU target of cutting its deficit to 3 percent of gross domestic product (GDP) by 2015. Without further fiscal measures, the IMF forecast a deficit of 5.1 percent of GDP by 2014, and 4.8 percent by 2015.
The IMF made particular reference to the Irish banking sector, acknowledging measures taken to strengthen it, but still saying that "vulnerabilities remain acute." And further upheaval in Ireland could affect other debt-laden eurozone members, according to the International Monetary Fund.
"Given market perceptions, spillover effects to other peripheral euro-area economies could be large," the statement said. "Greece, Portugal and Spain are the most vulnerable to volatility from an event in Ireland."
Author: Mark Hallam (AFP, dpa, Reuters)
Editor: Sean Sinico