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Published on Monday, September 19, 2011 by BBC News
http://www.bbc.co.uk/news/business-14969034
The International Monetary Fund (IMF) has told Greece it needs better tax collection and deeper spending cuts, not higher taxes, to avert its crisis.
The warning comes ahead of Greece's talks with the IMF and European authorities about whether it is doing enough to receive crucial funds.
Greece is trying to persuade them to release the next 8bn-euro (£7bn, $11bn) instalment of its EU-IMF loan.
It needs this money by next month to avoid defaulting on its debt.
The loan comes with the condition that Greece dramatically reduce its deficit, something that it plans to do by cutting the size of the state sector through redundancies, pay cuts and privatisations.
The IMF representative for Greece, Bob Traa, who is in Athens, said this was of crucial importance: "The public sector is very large. Another central element in our view must be to reduce public sector spending.
"This will inevitably require the closure of inefficient state entities as well as reductions in the excessively large public sector workforce and generous public sector wages, which in some cases are above those of the equivalent private sector workers."
Property tax
Greece is also proposing an emergency property tax, to be paid through household energy bills.
However, Mr Traa said this was not a good idea.
"In our view, you should not be drawn to higher and higher taxes on the limited tax base," he said. "This will neither be economically or politically sustainable."
He said a more efficient tax system would be more helpful and called for a "much stronger resolve to tackle the problem of tax evasion".
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