ATHENS: Greece’s government debt remains highly unsustainable and will be “explosive” in the long run, requiring a more credible debt relief plan from Europe, the International Monetary Fund said.
Addressing the debt burden of the beleaguered nation will require significant debt relief from European institutions, including dramatically extending the grace periods and maturities of the loans, the IMF said in its annual report on the Greek economy.
The IMF board is due to discuss the confidential report, which includes a debt sustainability analysis, on February 6, after which the findings will be made public.
Even with full implementation of the economic reforms the country has agreed to, “Greece’s debt is highly unsustainable” and “will become explosive in the long run,” as the government will have to replace highly subsidised official financing with market financing at much higher rates, the IMF said.
The pessimistic report, though in keeping with the fund’s repeated statements on the topic, makes it less likely the IMF will participate in any new European loan deal for Greece.
Months of bickering have delayed progress on Greece’s 86-billion-euro (US$92.4 billion) bailout program agreed in 2015 and officials are increasingly worried that elections this year in the Netherlands, France and Germany could further poison the efforts.
The IMF report says that in order to “provide more credibility to the debt strategy for Greece, further specificity will be needed regarding the type and scope of debt relief to be expected” from Europe.
This must include “ambitious extensions of grace and maturity periods, a full deferral of interest on European loans, as well as a locking in of the interest rate on a significant amount of European loans … to put debt on a sustained downward path.”
