Answering press questions on Greece, Wednesday, the Fund’s spokesman Gerry Rice made the following comments:
“Greece has legislated a strong package of reforms, which the IMF has welcomed; but we still need to see more specificity on the debt relief issue. So, these were very useful discussions on Monday, and those discussions continue, but essentially the IMF position is, as has been stated here and otherwise many times, that we need to see the two legs of the approach, that is the strong package of reforms, which we have now, but we also need to see debt sustainability, and before we would be able to propose IMF financial participation in a program, we would need to see both of those legs, and again that position has not changed.
So, the focus of the discussions on Monday at the Eurogroup and the continuing discussions and negotiations now, is really very much on that second leg, i.e. the debt sustainability, and the level of debt relief. Of course, that is linked, in turn, to discussions of the assumptions made around growth estimates and the primary surplus. And those discussions are continuing.
What we have said on the primary surplus is that given that Greece has legislated now this strong package of reforms, we think that this can help to underpin a surplus of 3.5 percent of GDP in the medium term, until 2022.
Over the longer term, however, we continue to believe that the surplus of 3.5 percent of GDP is not sustainable, as Greece cannot grow while maintaining such a high surplus, and we believe it would impose too high a level of austerity on the Greek people.
So, we think that surplus should come down, and that the fiscal space that this would create should be used to support growth via more investment, capital spending, lower tax rates, the creation of a modern social safety net – all of the things that we’ve discussed before.
And this path then, for the longer-term surplus and the assumptions underlying it, has not been agreed, so that’s a part of those discussions that relate to debt relief and debt sustainability.
In terms of the way forward, again, the discussion will be continuing. We know there is going to be another Eurogroup meeting on June 15. And the way I characterize our position, the IMF position, is that we are exploring all options within our existing practices and rules. There is no deal at this point; there is no agreement.
And on the question of what we’ve done in the past, and so on, if you look at IMF history you’ll see that it always depends on specific country circumstances. Yes, we have rules and practices, but we try to be flexible given — as flexible as we can -within a specific country’s circumstances.
And our objective is always to serve the member country as best we can and to use the mechanisms and procedures that are available to us.
That’s kind of my take on where we stand.
We’re looking for the package of policy reforms. We think we have a good basis for that now. And we are looking for debt sustainability.
And before we would be able to propose to our Board, a financial participation in a program, we would need to have both. We would need to have the package of reforms and the assurance of debt sustainability. That has not changed.
the assumptions underlying growth, and the assumptions underlying the primary surplus over the medium term, beyond 2022, as I just explained, that’s what’s under discussion now. And that, of course, is directly linked to the level of debt relief. So, those are the discussions now.
At the moment, do not see the Greek debt as sustainable. So, that’s the discussion that’s taking place now.”
IMF press briefing
