The International Monetary Fund believes that the Greek economy has reached its limits and that the country’s debt is now so difficult to be managed that it is necessary for the Europeans to undertake part of the cost.
Maurice Obstfeld, the director of the IMF’s Research Department, estimated on Thursday that “there are limits to the blows that economies can or should be able to suffer, so in particularly difficult cases we recommend a restructuring or a lightening of the national debt, requiring the creditors to take part of the cost of the adjustment. This is the approach we are adopting at the moment about Greece.”
IMF deputy spokesman William Murray answered a question about Greece saying that after the May 24 Eurogroup meeting of eurozone finance ministers the issue of the debt has now been laid on the table and “is constantly on the agenda.”
On the timetable regarding the Fund’s participation in the Greek program, Murray said that there is no specific timetable for that beyond the updating of the debt sustainability analysis within the year: “We have agreed that the lightening of the debt will be conditional on the targets Greece will be achieving in the course of the program. We are not yet able to say that the IMF is ready to participate in the funding; we hope we get to be so by the end of the year.”
According to Murray, the Fund’s latest debt sustainability analysis makes clear “what we believe is required: a significant lightening of the debt.” He also avoided commenting on the completion of the bailout review, saying that the negotiations are only between the Europeans and the Greek side.
Asked to comment on whether there was any distance between the views of IMF Managing Director Christine Lagarde and the head of the Fund’s European Department, Poul Thomsen, during the May 24 Eurogroup meeting, IMF spokesman Gerry Rice said this was “nonsense.”