IMF pushes for deep restructuring of Greek debt

The world’s watchdog for stability in countries’ external finances pushed for a large reduction in Greece’s loan obligations last week.

Officials at the International Monetary Fund last week proposed a moratorium on Athens’s interest and principal payments on its bailout loans until 2040 in a bid to keep the country’s debt-service needs below the equivalent of 15% of gross domestic product, The Wall Street Journal reported citing officials familiar with the talks.

Central to the Washington-based lender’s proposal, IMF staff have a relatively pessimistic forecast for Greek growth.

European capital however had not yet displayed a willingness to go that far on the €200bn of aid already extended to the Mediterranean country, on top of which Athens is asking for a further €60bn.

Such concessions would in turn force other European countries to top-up the current bailout vehicles such as the European Stability
Mechanism via their own national budgets.

IMF staff “like solutions that imply budgetary transfers” one European official told the Journal.

Nonetheless, the IMF had previously said it would not participate in any rescue unless Greece’s debts were “deeply restructured”.

Unfortunately, there are concerns in some corners that only the IMF’s involvement can force Athens to abide by its agreements.

US officials were reportedly pressing both the IMF and the Eurozone to find a compromise solution that would allow the multilateral lender to participate in a new bailout package.

German Chancellor Angela Merkel is said to favour IMF involvement but faces stiff opposition from conservative lawmakers, not to mention the populist right-wing AfD.