By Nikos Chrysoloras
BRUSSELS - A conflict is raging between Brussels, Frankfurt and Washington about the sustainability of the Greek debt and which of the three members of the troika -- the European Central Bank, the eurozone and the International Monetary Fund -- will foot the bill for the funding gap in the Greek bailout program.
Reuters reported on Wednesday that the IMF is pressing for so-called Official Sector Involvement (or OSI, a term which refers to a restructuring of the debts held by Greece’s international creditors) in a second Greek bond haircut, citing a Greek government official who said the issue is no longer between Athens and the troika but between the IMF and the EU.
Diplomatic sources in Brussels told Kathimerini that this would explain the inflexible attitude of the IMF’s representative in Athens, Poul Thomsen, in negotiations with the Greek government.
“By forcing Greece to say ‘no more,’ the Fund is sending the ball into the Europeans’ court so that they do something about it. For IMF officials it is incomprehensible that the program should have ground to a halt because of a sum of 15 to 20 billion euros,” a source told Kathimerini.
The ECB has repeatedly signaled via its head, Mario Draghi, that it has no intention of suffering any losses to its Greek bond portfolio. This was reiterated yesterday by the governor of Germany’s Bundesbank, Jens Weidmann, who said that “the ECB cannot cover the funding deficit of Greece,” and ECB Executive Board member Jorg Asmussen, who stated that Frankfurt “could not participate in a new restructuring of the Greek debt, as that would amount to the monetary funding of a state, which is forbidden.”
European Commissioner Olli Rehn said during a lecture at Harvard yesterday that “the Commission does not look forward to a new restructuring of the Greek bond.”
Worries about the future of the Greek economy grew on Wednesday as Fitch warned that the sustainability of the country’s debt is far from certain and that the debt will increase in the next two years, while a high-level official at Pimco, the world’s biggest fund management firm, said that it will be difficult for Greece to remain in the eurozone.
US investment bank Citi also expects a Greek exit from the euro area, with the contraction of the country’s economy seen at 10.7 percent next year.