Business

Greek public debt is highly unsustainable — International Monetary Fund report

Share
Greek public debt is highly unsustainable — International Monetary Fund report

However, the IMF review did not address whether the Fund would commit financial resources to Greece. While the European Union and the European Central Bank have been keen to press forward with a €10.8bn aid package agreed in 2016, the International Monetary Fund has taken a harder line, insisting the country must introduce stricter reforms.

Berlin has opposed large-scale debt relief unless Greece completes wide-ranging reforms and keeps running budget surpluses of 3.5 percent in the medium-term following the end of the bailout program in 2018.

The rare split among IMF's directors reveals some divisions in their views of Greece's fiscal performance and debt sustainability as the International Monetary Fund considers whether to participate in a new bailout for Greece needed by mid-2018.

Those fiscal targets, and varying views over Athens' ability to meet them, have been at the centre of the deadlock between the Greek government and its creditors.

The IMF has always been at loggerheads with Europe over whether Greece must meet a budget surplus target of 3.5 per cent of GDP or 1.5 per cent of GDP before further progress can be made with the €86 billion bailout agreed in 2015.

Eurogroup President Jeroen Dijsselbloem said: "It's surprising because Greece is already doing better than that report describes".

But he ruled out any relief on principal debt.

Last week, the head of Greece's bailout fund said that a further slice of aid could only be granted once the IMF makes the decision to formally join the program. A resolution would help unlock disbursements from the latest bailout that are needed to pay for these debt repayments but may also open the way for Greece's bonds to be included in the European Central Bank's bond-buying programme, a development that in turn would likely lower Greece's high borrowing costs.

Share