Greece faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the fund has warned Athens’ eurozone creditors, according to a Financial Times report published on Monday.
The warning, delivered to eurozone finance ministers by Poul Thomsen, head of the IMF’s European department, raises the prospect that it may hold back its portion of a €7.2bn tranche of bailout aid that Greece is desperately attempting to secure to avoid bankruptcy, the paper claimed.
Half of the €7.2bn, which is the subject of intense negotiations between Athens and its creditors in Brussels-based talks that resumed on Monday, is due to come from the IMF. Without the funds, Greece is expected to run out of cash this month.
Eurozone creditors, who hold the vast bulk of Greek debt, are adamantly opposed to debt relief. But IMF support is crucial both for its funds and to sustain political backing for the Greece bailout, particularly in Germany, FT said.
According to two officials cited by the paper who were present at a contentious meeting of eurozone finance ministers in Riga last month, Thomsen said initial data the IMF had received from Greek authorities showed Athens was on track to run a primary budget deficit of as much as 1.5 percent of gross domestic product this year. Under existing bailout targets, Athens was supposed to run a primary surplus of 3 percent of GDP in 2015.
With the large surplus now turning into a sizeable deficit, Greece’s debt levels would begin to spike again. “This would force either Athens to take drastic austerity measures or eurozone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sustainable path, the IMF believes. Officials said Thomsen specifically mentioned the need for debt relief during the three-hour meeting.”
(source: ana-mpa)
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