The International Monetary Fund will probably join Greece’s third bailout and might contribute almost a fifth to the 86 billion-euro ($97 billion) program, the head of Europe’s financial backstop said.
Speaking to reporters in Berlin on Thursday, European Stability Mechanism Managing Director Klaus Regling said “it would make sense” for the fund to use the 16 billion euros it didn’t pay out to Greece during the second bailout, which expired at the end of June.
“Up to 16 billion is something I could imagine,” Regling said. “I assume with a large probability that the IMF will contribute,” though less than the third it contributed to Greece’s bailout five years ago, he said.
Regling is expressing optimism on the IMF’s participation even after Managing Director Christine Lagarde said debt relief for cash-strapped Greece must go “well beyond what has been considered so far.”
The IMF has accepted the euro-region view that Greece’s debt load as a percentage of its economy isn’t a proper debt sustainability gauge as long as bond redemptions and interest payments are largely suspended thanks to the financial support, Regling said. Greece’s gross financing need will be below 15 percent of gross domestic product for a decade, he said.
Maturities on outstanding Greek debt can be extended and interest rates lowered to a “certain” degree to achieve the debt easing demanded by the IMF, while a nominal haircut for public creditors is not on the agenda, Regling said. One “needn’t do a whole lot” to help Greece meet the revised debt sustainability requirement, he said.