Cantillon: Ifo Institute twists the knife on Greece

Germany's Ifo Institute is proud of its standing as an independent think tank. Chancellor Angela Merkel and other political leaders might wish it were less so after cutting assessment of the pace of reform in fellow EU state, Greece.

Niklas Potrafke, director of the Ifo Centre for Public Finance and Political Economy, wrote: "The requirements of the third bailout package for Greece have only been half-heartedly implemented in the last seven months."

He draws attentions to the failure to date to set up a new privatisation fund and notes that although a discounted Vat rate was abolished on six Greek islands last October, it remains in place elsewhere. Furthermore, following a general strike in February, the Ifo man considers it unlikely the Greek government will be able to demand higher pension contributions.

His criticisms come as Greece and its international lenders edge closer to a compromise on signing off on a review of those bailout reforms that could unlock more aid to the country. Pension reform and regulating non-performing loans remain among the sticking points in a review that has dragged on for months mainly due to a rift among the lenders over Greece’s projected fiscal shortfall by 2018 – initially seen at 3 per cent by the EU, 1 per cent by Athens and 4.5 per cent by the IMF. A positive review will unlock up to €5 billion in aid. Athens needs the money to repay €3.5 billion to the IMF and the ECB in July, as well as for unpaid domestic bills.

Greek prime minister Alexis Tsipras hopes that would send a positive signal to markets and tempt investors back, while a debt restructuring would convince Greeks that their sacrifices are paying off after six years of belt-tightening.

It's a sensitive time, all the more so after recent leaked documents showed that the IMF is considering forcing Germany either to grant wide-ranging debt relief for Greece or see the IMF withdraw from the bailout programme. In the circumstances, the last thing Berlin will want is an acerbic commentary for an independent think tank on the subject, especially a German independent think tank.