ECONOMY

Greece may need more than 50-pct haircut, says report

A 50-percent writedown on Greek debt may not be enough to bring it down to sustainable levels, the Wall Street Journal cited an official from the International Monetary Fund as saying on Friday.

According to the report, an official at the IMF, who declined to be named, confirmed that staff are working on a starker economic assessment than outlined last month in its loan-program review for the country, adding that some IMF officials think «the debt sustainability analysis is not valid anymore» under the new economic forecasts. For Greece’s debt to be sustainable now «requires either a deeper haircut or additional loans from Europe,» the official was quoted as saying.

Meanwhile, adding to the gloomy outlook, a report by Kathimerini on Thursday suggested that a drop in state revenues in the first 11 months of the year means that it impossible for the state to achieve the target of collecting a total of 7.5 billion euros in December, January and February. This effectively means that the real economy has reached a critical point, that the budget deficit will likely end at 10 percent rather than the projected 9 percent, and that unless the government finds a way to contain tax evasion, there is no prospect for any improvement in state revenues.

Last week, Finance Minister Evangelos Venizelos had told Parliament that negotiations on private sector involvement plan (PSI+) are tough. ?On a daily basis, night and day, PSI is being negotiated, with great difficulties, which I am not able to talk about.?

According to sources cited by The Associated Press last week, lenders are trying to ensure that their losses will not exceed 50 percent, the rate agreed at a eurozone summit on October 27, and an agreement is yet to be reached on issues such as the maturities and the interest rates of the new bonds.

In its November report, the IMF had said that if a 50 percent writedown was agreed by private holders, Greece’s debt could reach a long-term sustainable level of around 120 percent of gross domestic product. Then, it expected for Greece’s economy to contract by 5.5 percent this year and 3 percent next year. It warned, however, that «results remain sensitive to growth outcomes … and even small deviations from the macro and program targets would not bode well for debt sustainability,» the Wall Street Journal said.

Despite the recent news from the IMF official, the Athens Exchange general index closed on Friday with 1.97 percent gains at 680.42 points.