The International Monetary Fund reiterated that it will contribute funds to Greece’s bailout under the condition that Europe will formally restructure the country’s debt, according to a Bloomberg report.
Greece has signed a three-year bailout program worth 86 million euros and although the IMF is participating in negotiations and monitoring the bailout program, it has not committed to contribute financially. It will do so only if Europe agrees to restructure the Greek debt.
“We want a debt operation agreed between Greece and its creditors,” IMF deputy managing director David Lipton told Bloomberg. “For us to go forward, we want more than a general assurance that the matter will be handled, with enough specific details on how it will be handled to assure the fund that Greece’s debt service will be on a sustainable path.”
Greek Prime Minister Alexis Tsipras has requested a new IMF program to replace a dormant one that’s on track to expire in March. Any new IMF program would have to be approved by an executive board representing the fund’s 188 member nations, according to Bloomberg.
The European Commission is pushing IMF to contribute funds so that Greece’s third bailout is the last.
Lipton told Bloomberg the IMF has four priorities for a new program: implementation of policy commitment, fiscal structural policies needed for medium-term sustainability, fixing the banking sector, and addressing the debt. In addition to the debt relief talks, the bank sector has become more prominent. according to Bloomberg.
There’s a lot of work to be done to ensure that the banking system is sound and well governed,” Lipton said. “The Europeans share that concern with us, and that’s why so much attention is being placed both on the asset-quality review and on the recapitalization or buffer requirements.”
According to the report, in the past Europe had pledged to restructure Greece’s debt if certain conditions were met. However, the European Commission hasn’t done so and keep repeating that Greece must proceed with reforms before the debt issue is put on the negotiating table again.
“The Europeans would prefer not to have a debt restructuring, for many reasons, particularly for political reasons,” said Andrea Montanino, a member of the fund’s executive board from 2012 to 2014.
According to a study released in January by Bruegel, a Brussels-based research group, found that Greece could gain a 31.7 billion-euro benefit in net present value if euro-area creditors agreed to three measures: more interest-rate reductions on loans from Greece’s initial bailout, extending the maturity of those loans by 10 years, and extending the loans from Greece’s second rescue program.
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