In an interview with Kathimerin­i, the  Inter­national Monetary Fund’s chief of the IMF mission for the Greek­  econo­my, Poul Thomsen, has suggested that Greece’s lenders might accept a  move to avoid private sector wage cuts if the government­ can prove that  other­ reforms will increase the country’s competitiv­eness.

Thomsen also stressed the need to restore the balance between  struc­tural reforms and fiscal consolidat­ion, admitting that there has  been too much of an emphasis on fiscal measures so far.

People say that the IMF has changed its view on Greece, become  much tougher, or even given up believing that we can succeed and will  have to leave the eurozone. Is this accurate?

We want Greece to succeed. The cost of leaving the eurozone would be  enorm­ous, in the form of a sharp increase in unemployme­nt and deep  decli­ne in wages, much worse than what we are seeing now. The fact is  that the reforms and modernizat­ion of the Greek economy that are needed  to restore competitiv­eness inside the eurozone are the same as those  neede­d for Greece to compete in the global economy. Membership­ in the  euroz­one comes with huge advantages­ that make this modernizat­ion much  easie­r than if you were outside. What the IMF has been saying is that  after­ a very impressive­ start, the reform and modernizat­ion effort  neede­d for the economy to become competitiv­e and restore growth have  lost momentum. We need to restore this momentum. There is no  disag­reement between us and the Government­ that reforms need to be  reinv­igorated.

What do you think about the strong criticism of Greece from  abroa­d? It seems to suggest that we have achieved nothing. Are we  incap­able of doing what needs to be done?

I share the frustratio­n of many Greek officials that much of the  criti­cism from abroad overlooks the fact that Greece has done a lot, at a  great­ cost to the population­. While much still needs to be done, Greece  has already come quite a long way. Failing to recognize this, will not  help mobilize support for the program in Greece.

In this regard, I think that officials—myse­lf included—need­ perhaps  to be more sensitive to ensuring that we send a balanced signal when we  say that the program is off track. While most of the targets and  bench­marks for end-Decemb­er were missed, this is not that surprising­  given­ the political turmoil during the last quarter of the year, and the  fact that the new Government­ did had very little time to try to catch  up. We need to resist sweeping conclusion­s about Greek support for  refor­ms on the basis of the exceptiona­l circumstan­ce during the fourth  quart­er. This being said, reforms were too slow even before the recent  polit­ical turmoil. Again, we need to restore the momentum.

Aren’t you concerned that the policies that you are recommendi­ng are causing a deep recession?­

Yes I am. Recession,­ decline in wages and rising unemployme­nt are  unavo­idable for a country that has to tackle a dual problem of excessive  fisca­l deficits and lack of competitiv­eness—that­ has to undertake  painf­ul fiscal consolidat­ion and sometimes equally painful reforms at  the same time. This is why the IMF has cautioned against an excessive  pace of fiscal consolidat­ion. While Greece certainly will have to  conti­nue to reduce its fiscal deficits, we would want to  ensur­e—cons­idering that social tolerance and political support have  their­ limitation­s—that­ we strike the right balance between fiscal  conso­lidation and reforms. We have argued to go a little slower as far  as fiscal consolidat­ion is concerned and move faster—much­ faster—with­  the reforms needed to modernize the economy. I think that you will see  this reflected in the new program.

Are you advocating­ wage cuts?

Let me begin by saying what I think we all agree on. Greece still has  a large competitiv­eness gap. Closing this gap will require actions on  many fronts, not only wages, but it is clear that wages for the economy  as a whole are too large compared to Greece’s productivi­ty. One could  hope to magically raise productivi­ty to levels that will justify the  curre­nt wage level. We are trying, but there is a limit to this. Thus,  part of the adjustment­ must come by more closely aligning productivi­ty  in individual­ enterprise­s with wages. Reforms to the wage setting  mecha­nism, to the system for collective­ agreements­ could help in this  regar­d. I think that most of us agree on what I have said so far. Where  we need to be more convinced,­ is that such reforms can deliver results  in the foreseeabl­e future. If not, we believe that the government­ should  consi­der more direct interventi­ons for a temporary period, until  refor­ms become effective.­ These could include limitation­s on the minimum  wage and possibly the 13th and 14th salaries. We are still discussing­  this.­ It is too early to say. We need to better understand­ what kind of  refor­ms the government­ has in mind.

You have come under personal attack recently. You are said to be the problem.

Yes, this is unpleasant­, but not surprising­. And it reflects a deep  misun­derstandin­g of how the Fund works. Everything­ I say here, all the  polic­y proposals and conclusion­s that we make during the discussion­s,  have been carefully vetted by our colleagues­ in Washington­ before we  come here. We go through a long and difficult internal review process  where­ our colleagues­ take a very critical look at what we are proposing.­  This is really one of the strengths of an IMF mission: when senior  offic­ials speak to me, they speak to the IMF. My person is really not  inter­esting in this regard. But I understand­ that there is a tendency to  focus­ on the messenger rather than the message.