Greece making progress but must do more on taxes: International Monetary Fund

WASHINGTON, (Reuters) - Greece has made progress in reducing government debt and improving its competitiveness, but needs to follow through on structural reforms to ensure its economy recovers, the International Monetary Fund (IMF) said on Monday after a mission visit to the country.

The IMPF, one of the indebted euro zone country's international lenders, said Greece must do more to fight its 'notorious' tax evasion and open up labour competition to ensure the burden of austerity does not fall disproportionately on wage-earners and pensioners.

"Decisive corrective actions are needed in each of these areas to promote an early supply response and achieve a more balanced distribution of the burden of adjustment," the IMF said after its visit.

"The mission welcomes that the government is refocusing its program in recognition of these problems."

Measures to cut Greece's budget deficit and make its economy more competitive are key conditions of its 240 billion euro bailout from the European Union and the IMF.

But tax evasion is endemic in Greece, making it more difficult for the government to shore up its finances and denting support for the pro-bailout ruling coalition.

Middle-class wage earners and pensioners, the hardest-hit group in Greece's six-year recession, account for 70 per cent of total personal income declared.

The Fund called on the Greek government to strengthen the independence of the tax administration to make it easier to reform the system. It also said Greece must lay off public workers to be able to hire new qualified staff, and not just rely on voluntary departures.

"The taboo against mandatory dismissals must be overcome,"the IMF said.

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, through hiring curbs, retirement and dismissals.