Greece's public debt can be manageable, the eurozone bailout fund said on Sunday, responding to a leaked report by the International Monetary Fund that the country's debt will explode to 275 percent of GDP by 2060.
A spokesman for the bailout fund, the European Stability Mechanism (ESM), said the path for Greek public finances agreed between Athens and the eurozone was credible and backed by contingency measures in case of unforeseen events.
“We believe that Greece’s debt burden can be manageable, if the agreed reforms are fully implemented, thanks to the ESM’s exceptionally favorable loan conditions over the long term and the recently adopted short-term debt relief measures,” the ESM said.
In the document, seen by the Financial Times, the IMF calculated that Greece’s debt load would reach 170 percent of gross domestic product by 2020 and 164 per cent by 2022. But it would become explosive thereafter and grow to 275 percent of GDP by 2060, the paper quoted the report as saying.
The spokesman said, however, that the eurozone had promised to offer Greece additional debt relief if Athens delivers on all its reform promises.
“As a result, we see no reason for an alarmistic assessment of Greece’s debt situation,” the spokesman said.
The IMF has long been calling for substantial eurozone debt relief for Athens, but Germany, which faces elections this year, has been strongly opposed to such a move until after 2018, when Greece is to finish all its promised reforms.
The IMF assessment of Greek debt developments may make it impossible for the Fund to join the current bailout for Greece, now shouldered only by eurozone governments, because the fund’s policy is to enter programs which in the end allow a country to cope on its own.
Eurozone governments want the IMF on board, but do not seem to be ready to provide the debt relief to Greece that is necessary for the Fund to join.