Klaus Regling, the managing director of bailout fund the European Stability Mechanism, has taken issue with the gloomy prognosis for the country given by the IMF. Writing in the Financial Times he says:
For many, Greece remains synonymous with bad news. Few were surprised, therefore, when the International Monetary Fund recently stated that the country’s debt was on an alarming trajectory.
A sober look at the facts shows that Greece’s debt situation does not have to be cause for alarm. The European Financial Stability Facility and the European Stability Mechanism, the eurozone’s rescue funds, have disbursed €174bn to Greece. We would not have lent this amount if we did not think we would get our money back…
The solution for Greece lies not in additional debt relief, but in the government implementing reforms so as to avoid delays in the issuing of the next tranche of the ESM loan. Investors understand the ESM framework and recognise the commitments of Greece’s European partners. Past experience shows that making loans in exchange for reforms works. It is no coincidence that Ireland and Spain today have some of the highest growth rates in Europe and very low funding costs after successfully completing rescue loan programmes with demanding reforms.
In 2016, even Greece outperformed expectations, with a higher than anticipated growth rate and a primary surplus. Further delays could put this positive trend at risk.