IMF, Eurozone Still at Loggerheads Over Greece

The International Monetary Fund has urged eurozone finance ministers to be more specific in their commitment to a debt relief package for bailed-out Greece. It’s a sensitive issue in pre-election Germany.

Talking to eurozone finance ministers on the fringes of a G7 meeting in Bari, Italy, IMF chief Christine Lagarde on Friday urged European creditors to “be far more specific” in their commitment to a debt relief package for cash-strapped Greece, DW reported.

The IMF has made a deal easing Athens’ repayment burden a condition of its participation in an €86 billion ($94 billion) bailout. Several eurozone governments want the IMF to take part in a third bailout for credibility reasons even though they disagree with the need for debt relief.

The IMF and eurozone finance ministers have been debating for how many years Greece is to keep its primary surplus at 3.5% of gross domestic product, with views ranging from 2-3 years to 10 years—the upper figure being regarded as completely unrealistic by Lagarde.

The IMF has insisted that debt relief or at least a clear promise of it now is required to restore investor confidence in the Greek economy, arguing that otherwise a nation, which sits on public debt of 180% of GDP, will be highly unlikely to return to market financing next year.

But a number of eurozone member states reckon that no debt relief is required at all, should Greece log a high primary surplus long enough.

The issue is particularly sensitive in Germany where the provision of debt relief to Athens is seen as a vote loser in the run-up to the September general election in the country.

Meanwhile, Greece is confident that the country’s economic output will exceed 2% in 2017 boosted by investments, privatizations and exports, Economy and Development Minister Dimitri Papadimitriou said.

This year will be “the year of real growth in Greece,” Papadimitriou said in a May 10 interview in Nicosia, Cyprus, at the annual meeting of the European Bank for Reconstruction and Development.

With the exception of 2014, Greece’s economy shrank every year since 2008. The International Monetary Fund in April cut its forecast for 2017 Greek economic growth to 2.2% from 2.8%. The European Commission revised earlier today its estimate for the Greek growth rate to 2.1% from 2.7%.