New Europe — The Executive Council of the International Monetary Fund (IMF) will decide on Thursday, July 20, whether or not the Greek debt is sustainable, Bloomberg reports.
In a statement to Bloomberg, the IMF’s European Department Director Poul Thomsen claims that the debt sustainability analysis (DSA) for Greece is ready and it is negative. IMF’s analysts do not believe the Greek sovereign debt is on a sustainable trajectory.
The IMF’s DSA report focuses on the objective of allowing Greece to return to market borrowing, without the support of the European Stability Mechanism and the IMF.
Once again, for the IMF the only road goes through debt-relief.
The DSA report assumes that Athens will be able to maintain a high primary surplus for a number of years, in line with the projections endorsed by European creditors. Nonetheless, the Greek sovereign debt does not appear to be in a sustainable trajectory without an outright haircut, a non-starter for the European creditors.
The IMF will once again demand more debt-relief measures. However, given the forthcoming German legislative elections in September 2017, these demands are not likely to be met. As the Greek programme expires in August 2018, it is likely that the IMF will remain in the Greek programme only as a consultant, without disbursing any payments.
For several months, Berlin’s insistence that IMF participates in the Greek programme delayed the disbursement of a €8,5bn tranche, undermining confidence in the Greek economy. The disbursement was approved in June, after the IMF accepted that the Greek a deal “in principle,” but with the understanding that any IMF funds would be disbursed towards the end of the programme, pending another “review” of the programme’s viability.
