No sur­prises from IMF re­port

ECB re­acts strongly against com­ment for a new stress test and share cap­i­tal in­crease for lo­cal banks

Kathimerini English - - Focus - BY VAS­SILIS ZIRAS & EVGENIA TZORTZI

Bond mar­kets re­sponded calmly yes­ter­day to the debt sus­tain­abil­ity anal­y­sis (DSA) of the In­ter­na­tional Mon­e­tary Fund, which found Greece’s debt ex­cep­tion­ally un­sus­tain­able, while de­cid­ing to par­tic­i­pate in the Greek bailout pro­gram with 1.6 bil­lion eu­ros. The mar­kets’ re­ac­tion al­lows for the gov­ern­ment to is­sue the five-year bond as early as on Mon­day.

The DSA re­it­er­ates that the eu­ro­zone’s com­mit­ments to se­cure the sus­tain­abil­ity of the Greek debt are not suf­fi­cient. The IMF es­ti­mates the debt will slide to 160 per­cent of gross do­mes­tic prod­uct in 2020 and to 150 per­cent in 230, be­fore soar­ing to 190 per­cent in 2060. Ser­vic­ing the debt will ex­ceed 15 per­cent of GDP in 2028, reach­ing as high as 45 per­cent in 2060.

The Fund ar­gues that the es­ti­mates of Athens and the eu­ro­zone on growth rates, pri­mary sur­pluses and other pa­ram­e­ters af­fect­ing the debt are op­ti­mistic and in­sists its own views are re­al­is­tic, say­ing that Greece has his­tor­i­cally been weak in im­ple­ment­ing re­forms and can­not sup­port high pri­mary sur­pluses for many years.

It goes on to say that rev­enues from pri­va­ti­za­tions will not ex­ceed 2 bil­lion eu­ros by 2030 and be­lieves that the state will not col­lect any sub­stan­tial funds from the sale of the bank shares it ac­quired in the last few share cap­i­tal in­creases. It there­fore calls on the eu­ro­zone to reach an agree­ment on a re­al­is­tic strat­egy for eas­ing Greece’s debt.

The IMF’s pro­posal for a new stress test on Greek banks and a fresh as­set qual­ity re­view were met with a clear dis­missal yes­ter­day by a Euro­pean Cen­tral Bank spokesman, who pointed to Frank- 1.1642 furt be­ing the sole mon­i­tor­ing author­ity that de­cides on such is­sues. The strong ECB re­sponse was also ad­dressed at the IMF’s es­ti­mate that Greek lenders will re­quire fresh re­cap­i­tal­iza­tion to the tune of 10 bil­lion eu­ros.

Stan­dard & Poor’s, mean­while, stopped short of rais­ing the coun­try’s credit rat­ing yes­ter­day – af­firm­ing it at ‘B-’ – but pointed to an up­com­ing up­grade switch­ing Greece’s out­look from sta­ble into pos­i­tive.

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