Eu­ro­zone, IMF still at odds over Greek debt

Kathimerini English - - Focus -

Un­der in­creas­ing pres­sure from the In­ter­na­tional Mon­e­tary Fund to ease Greece’s debt, Eurogroup head Jeroen Di­js­sel­bloem said yesterday that the sus­tain­abil­ity cri­te­rion for the coun­try’s ar­rears is that the yearly cost of ser­vic­ing them does not ex­ceed 15 per­cent of the Greek gross do­mes­tic prod­uct. How­ever, the IMF is call­ing for a “sig­nif­i­cant” ex­ten­sions to Greece’s grace pe­riod and the re­pay­ment pe­riod.

Di­js­sel­bloem said any mea­sures to be de­cided re­gard­ing the fur­ther restruc­tur­ing of Greece’s debt will be in the long term and un­der cer­tain con­di­tions that the eu­ro­zone is cur­rently ex­am­in­ing, adding that the real need for a light­en­ing of the debt will come in 15 years’ time.

This came as a re­sponse to Athens’s in­sis­tence on putting the is­sue on the agenda, ef­fec­tively telling the gov­ern­ment it should not ex­pect any ma­jor re­lief moves.

Dutch Fi­nance Min­is­ter Di­js­sel­bloem also told Reuters that the analy­ses of the Euro­pean Sta­bil­ity Mech­a­nism fore­see no fund­ing prob­lems in Greece dur­ing the next 15 years and that “we’ll see whether there is an in­crease to the fund­ing needs in the next 30 years.” How­ever, he noted that the de­fin­i­tive de­ci­sions on the is­sue will only be made af­ter con­sult­ing with the mem­bers of the eu­ro­zone, the Euro­pean Com­mis­sion and the IMF.

Poul Thom­sen, the IMF’s di­rec­tor for Europe, re­it­er­ated the Fund’s po- sition that, as it stands, the Greek debt is un­sus­tain­able and re­quires in­ter­ven­tions of a “sig­nif­i­cant” size by the cred­i­tors.

“We think the Greek debt has be­come highly un­sus­tain­able,” Thom­sen told a news con­fer­ence on the side­lines of an IMF meet­ing in Lima yesterday. “We think that Greece can­not deal with its debt just through re­forms and ad­just­ment, with­out debt re­lief,” he said.

Thom­sen added that the dis­cus­sion on how to pro­vide debt re­lief to Greece has shifted from a nom­i­nal hair­cut on the stock of its debt to cap­ping gross fi­nanc­ing needs, but with­out re­fer­ring to the 15 per­cent thresh­old. “What the ex­act tar­gets should be, we will have to dis­cuss, but there is no doubt in our mind that if Europe wants to go the route of pro­vid­ing re­lief by length­en­ing the grace pe­riod and length­en­ing the re­pay­ment pe­riod, we are look­ing at a sig­nif­i­cant length­en­ing of the grace pe­riod and sig­nif­i­cant length­en­ing of the re­pay­ment pe­riod,” Thom­sen said.

The Fund has made it known it will only take part if the eu­ro­zone takes some new debt re­lief mea­sures, and Di­js­sel­bloem stressed that he de­sires the par­tic­i­pa­tion of the IMF in the new bailout pro­gram for Greece, be­fore adding that the loans of­fered by the IMF have a far higher in­ter­est rate than the Euro­pean ones and part of the cur­rent pro­gram con­cerns the grad­ual re­place­ment of the IMF loans with more Euro­pean ones.

Speak­ing to Bloomberg, the Dutch min­is­ter com­mented that “it will take one or two ad­di­tional mea­sures and as­sur­ances [for the IMF] to par­tic­i­pate. One of them is the so­cial se­cu­rity re­form, plus cer­tain as­sur­ances on the fis­cal is­sues and of course the debt; we will come to it in Novem­ber,” said Di­js­sel­bloem.

He did add that “ap­proach is be­com­ing ever more clear. We will ex­am­ine how Greece will be able to man­age its debt on an an­nual ba­sis.” He said that, in this con­text, “we have done a lot to re­duce the in­ter­est that Greece will have to pay and we have granted a re­pay­ment pe­riod of 32.5 years. There­fore, there should be no prob­lem with the man­age­ment of the debt; but we will dis­cuss with the IMF on that. I am sure we will reach an agree­ment.”

Prices con­tin­ued to drop in Greece for a 31st con­sec­u­tive month in Septem­ber as the Con­sumer Price In­dex de­clined 1.7 per­cent on an an­nual ba­sis, the Hel­lenic Sta­tis­ti­cal Au­thor­ity an­nounced yesterday. Still, the value-added tax hike on food as of July 20 sent this cat­e­gory 3.7 per­cent higher last month.

Eurogroup pres­i­dent Jeroen Di­js­sel­bloem said Greece’s debt will be sus­tain­able if its ser­vic­ing does not ex­ceed 15 per­cent of the coun­try’s GDP.

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