Greece’s debt is manageable if the agreed reforms are fully implemented, according to the European Stability Mechanism after a leak of the International Monetary Fund’s report underlined in parallel that “there is no reason for scaremongering over the Greek debt.”…
An unnamed ESM representative underlined that, due to the discussion on Greek debt after the IMF leak, ESM made public its general remarks on the debt, SigmanLive reported.
“We believe that the Greek debt is manageable if the agreed reforms are fully implemented due to the very favorable ESM lending long-term conditions, as well as to the short-term measures for its relief which were recently adopted,” said the ESM representative.
“Greece and the Europeans agreed on an ambitious fiscal course during the period of the program which is credible and is supported by emergency measures in case of unforeseen events.
“Finally, Greece’s fiscal performance in 2016 was better than expected,” concluded the unnamed ESM representative.
In the document, seen by the Financial Times, the IMF calculated that Greece’s debt load would reach 170% of gross domestic product by 2020 and 164% by 2022. But it would become explosive thereafter and grow to 275% of GDP by 2060, the paper quoted the report as saying.
The ESM 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 alarmist assessment of Greece’s debt situation,” the ESM 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.
Meanwhile, Greek Central Bank Governor Yannis Stournaras said last week that Greece and its foreign lenders must both show “realism and flexibility” to swiftly complete a review of the country’s bailout program.