Greece at critical point, says IMF
Source: Agencies |
June 8, 2011, Wednesday
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Print Edition
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THE International Monetary Fund is open to delaying Greece's repayment of its international loans but believes a major restructuring of its debt would create untold problems in the eurozone, an IMF official said yesterday.
A senior Greek official also said that the government expected parliament to vote by the end of June on its medium-term austerity plan, a condition for a new international bailout by the IMF and the European Union.
Athens has made progress in tackling its debt crisis but cannot afford to relax the pace of reform, Bob Traa, the IMF's senior representative in Greece, told a banking conference. "Greece is at a critical juncture and has no time to waste, now is not the time to slow down," he said.
Athens is struggling to avoid defaulting on its debt, which totals 340 billion euros (US$499 billion) or about 150 percent of GDP.
EU officials are struggling to find a solution for its financing needs for coming years which both avoids triggering a default and pushes some of the burden onto the private sector.
"If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the eurozone," Traa said.
But he did hint that the IMF was open to other solutions. "Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortization right at the end of the program. This is a technical issue we can think about," he said.
Greece has already won an extension of the time it has to repay loans extended under last year's 110 billion euros rescue mounted by the EU and IMF.
Traa did not say whether his comments referred only to Greece's official international lenders, or whether terms could also be stretched for debt held by commercial creditors. Eurozone politicians have made clear that private creditors must share some of the burden in a second rescue, which Greece agreed with the IMF, EU and European Central Bank last Friday.
The ECB strongly opposes cutting the overall value of Greek debt held privately, whereby creditors would receive less than the face value of government bonds when they matured.
However, it has signaled that it is open to the idea that creditors would agree "voluntarily" to buy new Greek bonds when old ones they hold mature, meaning that Athens would not have to produce the cash up front.
It is unclear whether private sector banks would sign up to such a deal, how much they would be prepared to contribute and whether ratings agencies would look on such a move as a default.
A senior Greek official also said that the government expected parliament to vote by the end of June on its medium-term austerity plan, a condition for a new international bailout by the IMF and the European Union.
Athens has made progress in tackling its debt crisis but cannot afford to relax the pace of reform, Bob Traa, the IMF's senior representative in Greece, told a banking conference. "Greece is at a critical juncture and has no time to waste, now is not the time to slow down," he said.
Athens is struggling to avoid defaulting on its debt, which totals 340 billion euros (US$499 billion) or about 150 percent of GDP.
EU officials are struggling to find a solution for its financing needs for coming years which both avoids triggering a default and pushes some of the burden onto the private sector.
"If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the eurozone," Traa said.
But he did hint that the IMF was open to other solutions. "Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortization right at the end of the program. This is a technical issue we can think about," he said.
Greece has already won an extension of the time it has to repay loans extended under last year's 110 billion euros rescue mounted by the EU and IMF.
Traa did not say whether his comments referred only to Greece's official international lenders, or whether terms could also be stretched for debt held by commercial creditors. Eurozone politicians have made clear that private creditors must share some of the burden in a second rescue, which Greece agreed with the IMF, EU and European Central Bank last Friday.
The ECB strongly opposes cutting the overall value of Greek debt held privately, whereby creditors would receive less than the face value of government bonds when they matured.
However, it has signaled that it is open to the idea that creditors would agree "voluntarily" to buy new Greek bonds when old ones they hold mature, meaning that Athens would not have to produce the cash up front.
It is unclear whether private sector banks would sign up to such a deal, how much they would be prepared to contribute and whether ratings agencies would look on such a move as a default.
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