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IMF Presses Eurozone Over Greece Debt Relief

IMF Presses Eurozone Over Greece Debt Relief  IMF Presses Eurozone Over Greece Debt Relief

The International Monetary Fund is pressing the eurozone to let Greece skip paying interest or principal on bailout loans until 2040, say officials familiar with the talks.

The IMF wants the loans to Greece to fall due gradually in the following decades, and as late as 2080, according to the IMF’s proposal—a demand that goes far beyond what Greece’s European creditors, particularly Germany, have said they are willing to do to help Greece regain its financial health, Yahoo reported. ?

Greece’s interest rate on eurozone loans would be fixed for 30 to 40 years at its current average level of 1.5%, with all interest payments postponed until loans start falling due, under the IMF proposal.

The IMF’s proposal, presented to eurozone governments late last week—and described by one European official as “hardcore, really”—would keep Greece’s annual debt-service needs below 15% of its gross domestic product, under the IMF’s relatively pessimistic forecast for Greece’s long-term economic trajectory.

Eurozone governments, led by Germany, are reluctant to make such major concessions on their loans to Greece, which currently total just over €200 billion ($226 billion) with around another €60 billion to come under the latest Greek bailout plan.

But Germany, the eurozone’s dominant economic power, also wants the IMF to rejoin the Greek bailout as a lender. The IMF hasn’t yet signed up to the Greek program agreed last summer.

German Chancellor Angela Merkel has long viewed the IMF as essential to the credibility of the Greek bailout. Her government promised Germany’s parliament, the Bundestag, last year that the IMF would join the new bailout program before Europe disburses further money to Athens.

The chancellor and many of her lawmakers believe that, without the IMF, the eurozone wouldn’t be able to enforce rigorous fiscal and economic overhauls in Greece in return for loans. The European Commission, which partners the IMF in overseeing the bailout, is seen in Berlin as too soft on Greece. Finland and the Netherlands also want the IMF on board.

The US government is pressing both the IMF and the eurozone to find a compromise on debt relief that allows for full IMF involvement in the bailout.

The German chancellery is pushing hard for a deal with the IMF, say people familiar with the talks. But the IMF has said it cannot rejoin the bailout unless the eurozone deeply restructures its Greek loans. Greece’s debt burden is “highly unsustainable,” IMF head Christine Lagarde said recently.

 

Financialtribune.com