Commission report release held up

The differing views between the European Commission and the International Monetary Fund on the sustainability of Greece?s debt have led to a delay in the issuing of a report by Brussels on the country.

The IMF is maintaining a tougher stance vis-a-vis the Greek debt and how viable it could be and is seeking the drafting of a new streamlining program, as it considers the Commission?s estimates too optimistic.

The report, which is set to secure the sixth tranche of the international bailout for Athens, may not be published before the Eurogroup meeting on Friday.

Sources suggest, however, that the Commission expects the revised data on the Greek deficit and growth to take the public debt in 2010 to about 20 percentage points of the gross domestic product more than forecast in July.

The IMF has reportedly examined four alternative scenarios for the course of the debt, incorporating various levels of a Greek debt haircut, ranging from 39 percent to 60 percent. The main scenario provides for the 21 percent haircut agreed on in July. The IMF does not suggest that any of those scenarios should be implemented, but only examines the impact they would have on the Greek debt.

What is certain right now is that any solution will come with a stricter monitoring framework for the Greek economy. Troika officials consider it difficult to have normal monitoring with executive powers, but no one can rule out sending observers to key domains of the Finance Ministry, who would report both to the Greek prime minister and the eurozone.

Meanwhile, negotiations between the Institute of International Finance and the eurozone about private sector involvement (PSI) in the new bailout package for Greece are continuing in Brussels. The Europeans are aiming at a solution that would lead to a significant haircut of the Greek debt that would not be disputed by the markets (between 35 and 60 percent), while maintaining its voluntary character.

Austrian Finance Minister Maria Fekter said that ?Austria?s position is that the new package requires a somewhat greater participation of the private sector,? but always on a voluntary basis. However, the time frame is particularly tight for an agreement as the eurozone summit of this Sunday is fast approaching and the aim of bring Greek debt below 100 percent of GDP by 2020 seems difficult.

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