IMF report for Geece

Πέμ, 13/06/2013 - 20:15

The Wall Street Journal


March 16, 2012, 11:47 p.m. ET

IMF Report Offers Bleak Outlook for Greece


WASHINGTON—An International Monetary Fund staff report warned that Greece's loan program faces "exceptionally high" risks and said Athens may need further debt restructuring and additional financing that Europe should cover.

"A disorderly euro exit would be unavoidable" without continued support, fund staff said in the report.

The report was released a day after the IMF's executive board approved a €28 billion ($36.9 billion) loan for the country. The program is part of a larger bailout package that includes bailout cash from the European Union and a restructuring of Greek government debt held by the private sector.

The 231-page staff report, written by IMF economists, painted the bleakest picture yet of Greece's outlook. The report outlines fund's strategies on Greece and details risks involved in returning Greece back to economic health.

IMF staff said Greece can't absorb any adverse shocks or program failures, otherwise risking much higher debt levels. Officials are particularly concerned about the ability of Athens to politically deliver on the tough economic-overhaul policies Greece promised to win more than €200 billion in loans and debt forgiveness. In the near term, fund staff are concerned that forthcoming elections in Athens may mean new leaders aren't as committed to overhaul policies.

"Materialization of these risks would most likely require additional debt relief by the official sector and, short of that, lead to a sovereign default," IMF staff said.

Given the challenges and Athens's track record of failing to meet targets under its old loan program, the new loan package "is subject to exceptional risks," they said. "Greece will remain accident prone," with debt expected to remain so high for a long time.

Even if Greece follows through on its commitments, the country may still need up to €13 billion more than promised by Europe and the IMF through the first quarter of 2016, staff said.

The IMF report warned that even if Greece implements the program fully, it could take more than a decade for the country to fix its competitiveness problem. Staff said the long recovery period was partially caused by the limits of the debt swap with private bondholders and the decision for the European Central Bank to avoid restructuring its own holdings of Greek government bonds.

"Commitment by Greece's European partners to continue to provide support until [market] access is restored, provided that Greece continues to implement and adhere to program policies, is crucial," IMF staff said.

Several senior officials at the fund have said the Greece loan program simply buys time for other ailing euro-zone countries to put their economies back on a healthy path and for banks to insulate themselves against a worsening of the debt crisis. The fund is urging euro-zone leaders to boost the size of its general bailout fund by at least half and to use some of that cash to bulk up banks' capital defenses.

—Stelios Bouras in Athens contributed to this article.


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