Greece: IMF hails economic 'progress' but warns on tax evasion

Austerity measures continue to spark widespread protests in Greece

Debt-laden Greece has made progress in improving its finances, but the country must do more to fight tax evasion, the International Monetary Fund has said.

In a report, the IMF said Greece had made "exceptional" progress on reducing its budget deficit since 2010.

But the IMF, one of the lenders that backed a bailout of Greece, said the "notorious" problem of tax evasion was still a major issue.

Also, Athens was still too slow to cut public sector jobs, the IMF said.

Cutting the budget deficit and making its economy more competitive were key conditions of the 240bn-euro (£202bn) bailout from the European Union and the IMF.

"Progress on fiscal adjustment has been exceptional by any international comparison," the IMF said in its report, which followed a visit by officials to the country.

"Greece has also made a significant dent in its competitiveness gap," the report said.

But the IMF added that "insufficient" structural reforms have meant that deficit cutting has been achieved primarily through cutting jobs and salaries bringing "unequal distribution of the burden of adjustment".

The IMF also said that "very little" had been done to tackle Greece's "notorious tax evasion," with the rich and self-employed "simply not paying their fair share" as austerity unfairly hits mostly public sector workers earning a salary or a pension.

'Taboo'

The Fund called on the government to strengthen the independence of the tax administration to make it easier to reform the system.

On public sector jobs, the IMF said Greece is too reliant on voluntary departures. "The taboo against mandatory dismissals must be overcome," the report said.

Last month, the Greek parliament adopted a law that will allow the dismissal of 15,000 civil servants.

But under Greece's current bailout plan agreed in November, Athens has to cut 150,000 public sector jobs overall from 2010 to 2015, about a fifth of the total.

Compulsory redundancies are a sensitive issue in Greece where unemployment has hit a record high of 27.2% and the economy is now in its sixth year of recession.

Last week, a European Union report forecast that Greece would end years of recession in 2014 with growth of 0.6%, in line with an earlier forecast by the IMF.

But, following what the IMF forecast will be a 4.6% contraction of the economy this year, the Fund warned that attempts to "artificially" stimulate growth should be resisted.