I.M.F. Demands Greece Debt Relief as Condition for Bailout

rtr4ujd6 FRANKFURT — The International Monetary Fund said on Tuesday that it would remain involved in Greece’s bailout only if eurozone leaders agreed on a plan that would make the country’s debt manageable for decades to come. The aggressive stance sets up a stand-off with Germany and other eurozone creditors, which have been reluctant to provide additional debt relief. The I.M.F., in a report released publicly on Tuesday, proposed that eurozone creditors should consider letting Athens write off part of its huge debt or at least make no payments on its eurozone debt for 30 years. A new rescue program for Greece “would have to meet our criteria,” a senior I.M.F. official told reporters on Tuesday, speaking on condition of anonymity. “One of those criteria is debt sustainability.” The official spoke as the I.M.F. disclosed a report it submitted to eurozone officials before a weekend meeting to consider the new bailout deal for Greece. The eurozone officials did not adopt the I.M.F.’s debt relief proposals in the tentative agreement they reached with Prime Minister Alexis Tsipras of Greece on Monday. Germany and other countries, including the Netherlands and Finland, are loath to grant Greece easier terms, which are a tough sell to their own voters. But Germany in particular is anxious for the I.M.F. to continue monitoring Greece. The implied threat by the organization to pull out increases pressure for Germany to compromise. 15imf-web-master675 What the eurozone officials did accept from the I.M.F. report was the fund’s assessment that Greece’s financial shortfall vastly exceeded the 53.5 billion euros, or $60 billion, that the country requested last week as a bailout loan. The I.M.F., which along with the eurozone countries is one of Greece’s main creditors, had concluded that Greece would need additional financing of €85 billion. The report to the eurozone, and similar assessments that came in on Friday from the European Central Bank and the European Commission, helped identify the size of the bailout package the eurozone officials then spent the rest of the weekend trying to agree to. In setting the conditions Greece will need to meet in order to receive a new bailout — a package that the country’s Parliament will begin to vote on Wednesday night — the eurozone creditors have acknowledged that it might be necessary for Athens to be given some relief in paying off its debt, which now exceeds €300 billion. 2083 But the document that the eurozone leaders issued on Monday, outlining the tentative bailout agreement, makes clear that no such relief will be considered unless the Greek Parliament first accepts the terms of the deal. And the document stated unequivocally that no write-down of the debt — or a haircut — would be considered. The I.M.F. said in its report that a write-down could be avoided, but only if creditors extended the schedule for Greece to repay its debt. The only other alternative to a haircut would be for the eurozone countries to give Greece the money it needs to repay them. “The choice between the various options is for Greece and its European partners to decide,” the I.M.F. report said. Despite the I.M.F.’s help in making the case for Greek debt relief, the fund and Athens have an increasingly antagonistic relationship. Greece, which missed a big loan payment to the fund last month and another smaller one on Monday, has fought to escape I.M.F. oversight. And Mr. Tsipras held up weekend negotiations over the question of what role the I.M.F. would have in a new bailout program. Eurozone leaders who value the I.M.F.’s expertise insisted on having Greece invite the fund to take part in the program, and Mr. Tsipras relented. 500 Antagonism aside, the I.M.F. in recent weeks has been an important ally on the debt relief issue. On July 2, the I.M.F. published an analysis of Greece’s debt that estimated the country would need an additional €50 billion in financial aid, although that report also criticized the country’s current government for having made the problem worse. I.M.F. officials said at the time that their €50 billion estimate was already outdated because of the steady deterioration of the Greek economy. One fund official said on July 2 that the figure might be €60 billion. By Friday, when the I.M.F. presented its updated estimates to eurozone officials, the estimated shortfall had grown to €85 billion. How the eurozone, or the I.M.F., might eventually find ways to help Greece ease its burden remains to be seen. But there is no assurance that any relief will be granted — especially if Greece cannot commit to pushing through the tough economic measures required in the bailout proposal. The one certainty is that Greece’s rapidly growing financial needs are likely to create additional strains on the eurozone at a time when its unity is already shaken. With Greek banks closed and foreign investment at a standstill, the economy is sinking fast, undercutting tax revenue and making it even harder for the government to pay its debts. After missing a €1.6 billion payment to the I.M.F. on June 30, and a €456 million payment on Monday, Greece is now more than €2 billion in arrears to the fund. Greece cannot receive any more financial aid from the I.M.F. until it catches up on its payments. But the organization has not yet taken disciplinary action against the country. Gerry Rice, director of communications for the I.M.F., said in a statement on Monday that the fund’s executive board in the coming weeks would discuss whether to grant Greece an extension on repaying the debt. In addition, Greece has a €4.25 billion payment due to the European Central Bank on Monday, for which it probably does not have the money. According to the latest I.M.F. estimates, Greece’s debt could equal 200 percent of gross domestic product in two years. That compares to 177 percent of G.D.P. at the end of 2014, when the debt totaled €317 billion, according to European Union figures. Only Japan has a higher debt as a proportion of the economy. Greece would need to spend a sum equal to more than 15 percent of G.D.P. annually to pay interest and principal on its debt, according to the latest I.M.F. report. And that, in the fund’s view, is an unbearable burden. Source