The IMF is calling for more Europe to continue to help Greece

christine-lagardeDemanded by the Europeans, the IMF’s participation in the aid plan for Greece is far from certain and will only be possible if the EU is committed to massively reduce the country’s debt, warned Tuesday the institution.

“We have been very clear on the fact that (…) we need a concrete and ambitious solution to the debt problem” to grant new loans to Athens, said on condition of anonymity a senior from International Monetary Fund by submitting a report on Greek debt.

This document, published in a hurry after leaks in the press, had been delivered to European leaders Saturday, two days before the conclusion of a preliminary agreement with Greece providing a third plan to help 82 to 86 billion euros over three years in exchange for drastic reforms.

The diagnosis of the IMF is clear: the Greek debt is “totally unsustainable” and is expected to approach 200% of GDP in the next two years, against a ratio of about 175% currently.

However, under its internal rules, the Fund can not lend to a country if its debt is considered “viable, with a very high probability.”

The Institution of Washington, who had circumvented its own rules to bail out Greece in 2010 and 2012, seems determined not to repeat the experience.

For several weeks, she therefore calls on Europeans to alleviate the staggering national debt, which is approaching 320 billion euros, to make it more “viable”.

But for now, its demands have not been heard by Europeans who are by far the largest creditors of Greece.

“A little lower”

The agreement wrested in extremis Monday that requires black and white presence IMF alongside Europeans, thus merely states that “additional measures” debt relief could be considered if Athens keeps its commitments.

“It is not very concrete, it is a little low,” swept the senior IMF official, speaking during a telephone press conference.

The Fund’s report uses a more nuanced language, but said little else. “The debt of Greece may now be viable with the provision of debt relief that go far beyond what Europe has considered doing so far,” the document says.

The IMF submitted three options to Europeans. The first would extend from 10 to 30 years the “grace period” during which Greece would not have to repay its debt to Europeans.

The second, more vague, reside in “annual transfer” of funds that would go directly feed the budget of Greece.

The third is without a doubt the most controversial: it would be a pure “debt forgiveness” in which Europeans and simple, Berlin head, do not want to hear about.

The German Chancellor Angela Merkel and has repeatedly assured that a conventional reduction of Greek debt was “out of question”.

In a previous report published before the Greek referendum on 5 July, the Fund had however already mentioned this option, amounting to € 53 billion net loss incurred by the Europeans if Athens does not take its budgetary targets.

An economic downturn in Greece would also heavy financial consequences for Europeans, prevents the Fund in its report.

“Exceptional additional funding may be required from the Member States” in addition to the 85 billion euros proposed by the IMF and held more or less, for the euro area as a pre-agreement with Greece.

Ultimately, this report could revive the debate on the IMF’s commitment to Greece, which is demanded by Germany, but bitterly opposed by Athens.

For now, the issue is pending: the IMF is in fact legal incapacity to pay a cent to Greece since the country has failed vis-à-vis the institution on June 30

“We can not initiate discussions on a program until the arrears have not been clean”, said the IMF official Tuesday.

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