IMF to in­sist on ‘un­sus­tain­able debt’ and say banks need 10 bln

Kathimerini English - - Focus - EIRINI CHRYSOLORA

The In­ter­na­tional Mone­tary Fund has again found that Greece’s debt is un­sus­tain­able un­der ev­ery sce­nario, ac­cord­ing to the report the Ex­ec­u­tive Coun­cil will be dis­cussing on Thurs­day to de­cide on the Fund’s par­tic­i­pa­tion in the Greek pro­gram, sources say.

The word from Washington is that the Fund’s tech­nocrats have in­cluded var­i­ous sce­nar­ios in their debt sus­tain­abil­ity anal­y­sis (DSA), in­clud­ing one that in­cor­po­rates the euro­zone’s com­mit­ments for short-term mea­sures and a high pri­mary sur­plus, but none see Greece’s debt becoming sus­tain­able.

Washington sources sug­gest that the Ex­ec­u­tive Coun­cil will tell the euro­zone that un­less cred­i­tors of­fer more debt-re­lief mea­sures, the IMF will not be able to par­tic­i­pate in the Greek pro­gram with funds.

The IMF’s base­line sce­nario is iden­ti­cal to the one pre­sented in Fe­bru­ary, with the debt be­ing un­sus­tain­able af­ter 2030, as ser­vic­ing it will re­quire more than 20 per­cent of gross do­mes­tic prod­uct. The IMF will also likely warn about weak­nesses in the Greek credit sys­tem, claim­ing it will need ad­di­tional fund­ing of 10 bil­lion eu­ros.

An IMF source said that the chances of the fund dis­burs­ing the 1.6 bil­lion eu­ros Athens has re­quested “are lim­ited.” How­ever, what it seems the Fund is re­ally wait­ing for is whether a gov­ern­ment more amenable to Greek debt re­lief will emerge from Septem­ber’s elec­tions in Ger­many, some­thing that is not at all cer­tain right now.

As things stand, we are prob­a­bly head­ing for the worst com­bi­na­tion, as Fi­nance Min­is­ter Eu­clid Tsakalo­tos said in May: that the IMF is heeded only in its de­mands for more aus­ter­ity and not for debt re­lief. This is why, ac­cord­ing to IMF sources, the report to be dis­cussed in­cludes no time limit for the re­view of the debt’s sus­tain­abil­ity that would de­ter­mine the Fund’s de­fin­i­tive par­tic­i­pa­tion in the pro­gram.

In most other cases of coun­tries with a sim­i­lar sta­tus in the past, with an agree­ment on “ap­proval in prin­ci­ple,” a one-month pe­riod was granted for the IMF to de­cide whether it would ac­ti­vate a pro­gram or not. In Greece’s case it is ob­vi­ous that the IMF has de­cided to re­main flex­i­ble, grant­ing a mar­gin to the euro­zone to act as it con­sid­ers best for the light­en­ing of the Greek debt. It is there­fore pos­si­ble that the IMF re­mains only as a con­sul­tant up to the end of the Greek pro­gram in Au­gust 2018.

The IMF’s Ex­ec­u­tive Coun­cil will likely de­cide on Thurs­day for the Fund to stay on in the Greek pro­gram only as an ad­viser.

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