The IMF said Thursday (19 May) that Greece would need a lengthy period free from debt payments to achieve sustainable finances if the European Union does not agree to cutting the debt up front.
“It is possible to restore debt sustainability without upfront haircuts, although this would involve providing very concessional loan terms including long grace and maturity periods and very low interest rates,” IMF spokesman Gerry Rice told reporters.
The comment came as Greece and its European creditors open talks on how to reduce the country’s debt burden, which the International Monetary Fund said must happen if the IMF is to contribute any more of its own funds to Greece’s ongoing rescue.
For the International Monetary Fund, five years of playing junior partner in European bailouts for Greece has been a “never again” experience, and the worst may be yet to come.
In a press briefing Rice gave no details of the IMF’s view amid reports that it has asked the EU creditors to give Greece a grace period until 2040 before it resumes paying both principal and interest on its huge debt.
He also said he was “not aware” of reported discussions that the debt relief could involve more expensive IMF loans to Greece being bought out and replaced with cheaper ones from the EU.
But he said such a move “would make sense”, though it was entirely up to Greece and its EU creditors.
Athens is battling to obtain debt relief from its EU creditors, arguing that its burden of loan repayments is too hefty to be sustainable, and that reforms being demanded of it are too onerous.
But Germany has been deeply opposed. The German government believes Greece should be granted debt relief only in 2018 after it has fully complied with its EU bailout, according to a finance ministry document seen by AFP Thursday.
Eurozone finance ministers yesterday (9 May) proposed to restructure the Greek debt, but with conditions that could cost Athens dearly. EurActiv’s partner La Tribune reports.
As for the IMF’s participation in the rescue, Rice said the global emergency lender is still assessing the reforms Athens is undertaking to strengthen its finances.
“We don’t want more austerity for Greece and we certainly don’t want more of the burden to fall on the poor and the most vulnerable,” he said.
Eurozone finance ministers yesterday (9 May) gave themselves until 24 May to reach a deal on debt relief and unlocking bailout cash for Greece as they lauded Athens for passing tough reforms.
- 24 May: Meeting of eurozone finance ministers (Eurogroup) to focus on Greece (agenda)