In its latest review of the Greek economy under Article IV of its charter, the IMF has issued a warning about the risks of increasing public sector wages. The Fund stressed that excessive salary and pension hikes should be avoided and reminded that, during Greece’s bailout years, public sector wage policies were not only dictated by the Ministry of Finance but were also shaped by court decisions.
The IMF expressed concern about the potential reinstatement of public sector bonuses, noting that it would add an estimated €2.5 billion annually to Greece’s budget, with the total cost rising to €3 billion when employer contributions are included. Since this would be a permanent fiscal measure, the Fund warned that Greece would need to secure funding for it in the long term, which could put additional pressure on public finances.
At the same time, the IMF’s stance on Greece’s debt sustainability has evolved. While in 2018 it argued that additional long-term debt relief measures would be necessary, it now considers Greece’s debt sustainable—provided that fiscal discipline remains intact. The Fund also confirmed that its projections take into account Greece’s repayment obligations beyond 2032, when it will start repaying €90 billion in loans received from the European Stability Mechanism (EFSF) as part of the second bailout program.
