The Eurozone will have to “go even further” than planned to reduce the Greek debt, and may even have to forfeit part of it. This is according to the International Monetary Fund, which published a report on Tuesday. “The Greek debt will only be viable if measures are taken to reduce it, measures which go further than Europe has yet considered”, the IMF wrote in a report handed to European authorities on Saturday. It was written before the compromise reached at Athens on Monday. This pre-agreement included a new 82 to 86 billion euro aid package, on condition that Athens puts reforms in place quickly. It only briefly refers to a possible reduction of the debt.
In its report, the Fund claims the Greek debt is “completely unviable” and will reach 200% of its GDP in “the next two years”, instead of the current 175%.
Given the situation, the Fund says Europe has no other choice than to reduce Greece’s debt, an option Germany is fighting. However, the Washington Institution will not financially assist Greece if that doesn’t happen.
The IMF has given Europe three options. The first would be to extend the “grace period”, during which Greece will not have to pay back any of its debt to Europe, by 10 to 30 years. The second is “annual transfers” of aid to Greece. The third is purely and simply “wiping out the debt”, the report says.
The debt issue aside, the IMF has said that if the situation in Greece gets worse, it could require “exceptional supplementary financing by Europe”. More than the 85 billion euro budget put forward by the IMF, and more or less accepted by the Eurozone in its agreement with Greece.
Jason Bennett (Source: Belga)