Greece must continue to implement reforms to put its towering debts on a sustainable path, German Finance Minister Wolfgang Schaeuble said Saturday, on the sidelines of the International Monetary Fund's spring meetings in Washington.
"Greece can and must still do more," he said.
Athens must cut a further 5.4 billion euros (6.1 billion dollars) to keep government finances in line with the most recent rescue package, agreed last year with Greece's international creditors.
Pension cuts and tax hikes are reportedly on the table. The Greek government says it will pursue necessary legislation before the end of April.
This week in Washington, IMF economists emphasized the need for Greece to broaden its tax base.
The country's income tax only applies to the top 45 per cent of households, who have seen high tax rates only rise since Greece first sought an international bailout in 2010. By comparison, Portugal only exempts the bottom 2 per cent of income taxpayers, and the eurozone average threshold for income taxation is 18 per cent, the IMF said.
Despite "huge attempts" to improve tax collection in recent years, evasion rates have actually risen.
"The policy of ... increasing these high rates at the end is simply not working," said Poul Thomsen, the IMF's chief economist for Europe. "And what we need to do is to broaden the tax base by lowering the threshold, not dramatically, but gradually."
Talks between Greece and its international creditors - the IMF and European institutions - are slated for Monday.
The creditors hope to complete the process "relatively quickly" with Athens, Schaeuble said, though he was unsure if hopes for an April agreement could be met.
Without an agreement, Greece will be unable to continue to receive tranches from its third bailout, worth up to 86 billion euros under the 2015 package. EU Economy Commissioner Pierre Moscovici warned this week that Greece's cannot remain solvent indefinitely without help from the creditors, though government coffers are not yet at a crisis stage.
The IMF has yet to contribute financially under the third bailout, insisting on further Greek reforms while observing that the bailout goal of a Greek budget surplus equal to of 3.5 per cent of gross domestic product is politically unsustainable.
Schaeuble has insisted that the IMF must continue to participate. While European institutions could now carry the Greek financial support alone, the IMF's continued presence is a legal and poltical prerequisite for Germany and the EU, he said.
The Washington-based crisis lender brings essential technical expertise to the rescue process, Schaeuble said.
IMF chief Christine Lagarde said that IMF staff had "productive, cordial" meetings in Washington with Greek and European authorities.
"The team will return to Athens early next week," she said. "There is plenty of work to do, so don't expect immediate outcome, because those things take time."
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