IMF says Greece needs fast reform
By George Georgiopoulos and Harry Papachristou |
May 19, 2011, Thursday
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Print Edition
Print Edition
THE IMF warned yesterday that Greece's drive to shore up its troubled finances would fail unless it sharply accelerated reforms, and the ECB hit back at suggestions a debt restructuring might be the solution.
European finance ministers broke a taboo this week and acknowledged for the first time that some form of restructuring might be required to ease Greece's debt burden, which at 150 percent of annual output is among the highest in the world.
They have said they could ask private creditors to agree to a voluntary extension of the maturities on their Greek debt but have also made clear that the priority is to ensure an acceleration of Greek reforms.
"The program will not remain on track without a determined reinvigoration of structural reforms in the coming months," Poul Thomsen, an International Monetary Fund envoy who is monitoring Greek economic progress, said in Athens.
"Unless we see this invigoration, I think the program will run off track," he said, in one of the strongest warnings to Greece since it sealed the rescue one year ago.
The Greek government has struggled to rein in rampant tax dodging and is under acute pressure to begin selling off state assets to help Greece meet fiscal targets tied to last year's 110 billion euro (US$157 billion) EU/IMF bailout.
Under its rescue terms, Athens is charged with reducing its budget deficit to 7.6 percent of gross domestic product this year. Thomsen said that without further measures Athens would not be able to get it much below 10 percent.
The euro struggled to hold onto gains against the dollar and the cost of insuring Greek debt against default rose yesterday amid ongoing talk of a restructuring.
Eurozone ministers have not spelled out how what they refer to as a "reprofiling" of Greek debt would work. Convincing private holders of Greek bonds to voluntarily accept later repayment could be difficult.
Such a move would buy Greece more time but not reduce its overall debt burden. Many economists believe it would be followed by a more aggressive restructuring involving "haircuts," or forced losses, of 50 percent or more from 2013, when policymakers have said they could opt for radical steps.
The European Central Bank, which holds up to 50 billion euros in Greek sovereign bonds on its own books, reiterated yesterday that even a "soft restructuring" would risk the stability of the eurozone.
European finance ministers broke a taboo this week and acknowledged for the first time that some form of restructuring might be required to ease Greece's debt burden, which at 150 percent of annual output is among the highest in the world.
They have said they could ask private creditors to agree to a voluntary extension of the maturities on their Greek debt but have also made clear that the priority is to ensure an acceleration of Greek reforms.
"The program will not remain on track without a determined reinvigoration of structural reforms in the coming months," Poul Thomsen, an International Monetary Fund envoy who is monitoring Greek economic progress, said in Athens.
"Unless we see this invigoration, I think the program will run off track," he said, in one of the strongest warnings to Greece since it sealed the rescue one year ago.
The Greek government has struggled to rein in rampant tax dodging and is under acute pressure to begin selling off state assets to help Greece meet fiscal targets tied to last year's 110 billion euro (US$157 billion) EU/IMF bailout.
Under its rescue terms, Athens is charged with reducing its budget deficit to 7.6 percent of gross domestic product this year. Thomsen said that without further measures Athens would not be able to get it much below 10 percent.
The euro struggled to hold onto gains against the dollar and the cost of insuring Greek debt against default rose yesterday amid ongoing talk of a restructuring.
Eurozone ministers have not spelled out how what they refer to as a "reprofiling" of Greek debt would work. Convincing private holders of Greek bonds to voluntarily accept later repayment could be difficult.
Such a move would buy Greece more time but not reduce its overall debt burden. Many economists believe it would be followed by a more aggressive restructuring involving "haircuts," or forced losses, of 50 percent or more from 2013, when policymakers have said they could opt for radical steps.
The European Central Bank, which holds up to 50 billion euros in Greek sovereign bonds on its own books, reiterated yesterday that even a "soft restructuring" would risk the stability of the eurozone.
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