IMF urges 'unconditional' Greek debt relief
May 23, 2016
Greece needs “unconditional debt relief” from its European creditors at least until 2040 to allow its finances to recover, the International Monetary Fund said on Monday in a new debt sustainability analysis (DSA) report.
The IMF pushed for a “substantial reprofiling” of Greece’s sovereign debts, including long-term deferrals of interest and principal payments. The report also recommended keeping official interest rates fixed at a maximum of 1.5 percent until 2040 to help contain debt.
The report - which outlined what it would take for Greece to rebalance its finances and help the economy return to long-term growth - said the budget surplus and growth targets were unattainably high. And the massive unpopularity of the spending cuts that would make a 3.5 percent primary budget surplus possible was an additional hindrance.
“In view of this, staff believes that the DSA should be based on a primary surplus over the long run of no more than 1.5 percent of GDP,” the report said. “This target would in staff’s view be within the realm of what is plausible.”
The IMF said that lower targets would still be ambitious enough for European lenders to support, and would enable Greece to meet IMF lending criteria for “exceptional access."
The report comes ahead of a meeting between European finance ministers conducting a review of Greece’s bailout and discussing possible debt restructuring. Athens is trying to unlock another 10 million euros ($11.2 billion) to avoid another default in July.
The IMF said that debt relief would provide a “strong and credible signal to markets about the commitment of official creditors to ensuring debt sustainability.”
But Germany and some other eurozone countries oppose partial debt relief, with German finance minister Wolfgang Schäuble once saying that it was simply “not necessary” and distracted from the discussion around reform. The IMF, however, has been firm in its stance that substantial debt relief would be a condition for it to participate in a new bailout program.
jd/uhe (AFP, Reuters)