The International Monetary Fund said IMF officials didn’t push for large-scale debt relief in recent negotiations for emergency financing for Greece, but rather underscored that more financing would be needed if Athens failed to live up to its original bailout conditions.
“IMF European Department Director Poul Thomsen pointed to the trade-off that needs to be made in reaching agreement in the current discussions,” the IMF said in an emailed statement, referring to the negotiations held in Riga, Latvia, late last month, Dow Jones reported.
In particular, Thomsen told negotiating parties that “the more distant the measures agreed and targets are from the original commitment in 2012, the higher would be the need for additional financing and debt relief to make the country’s debt sustainable.”
Under IMF rules, the fund can’t lend emergency financing unless there is sufficient cash to meet all of the country’s obligations over the next 12 months.
In 2012 Greece’s European creditors agreed to provide any debt relief needed to reduce the country’s obligations to substantially below 110% of gross domestic product in 2022 if Athens met its bailout terms. The IMF says that debt-relief deal is still in play should Athens agree to bailout terms that meet the old bailout parameters.
If Greece and its creditors agree to loosen the previous requirements for budget belt-tightening and economic overhauls, ostensibly it would require more cash to fill the financing gap and bolder debt-relief efforts to ensure the country doesn’t drown under the weight of its debt obligations.
But neither Athens’ new antiausterity government or its European paymasters have shown much flexibility in negotiations, pushing the country closer to default and rattling investors.
