The Telegraph — The International Monetary Fund is still poised to pull out of Greece’s third international rescue in five years over the sensitive issue of debt relief.
The fund is pushing for a restructuring of at least €100bn of Greece’s €320bn debt pile, according to a report in Germany’s Rheinische Post.
Such bold measures to extend maturities and reduce interest payments are set to be rejected by its European partners, who are unwilling to impose massive lossess on their taxpayers.
The head of Greece’s largest creditor – Klaus Regling of the European Stability Mechanism – told the Financial Times that such radical restructuring was “unnecessary”.
Debt relief is also not due to be discussed when eurozone finance ministers gather to meet for talks on Monday, said EU officials.
This intransigence could now see the IMF withdraw its involvement when its programme ends in March 2016. In debt sustainability analysis carried out by body, it has suggested Greece may need a full moratorium on payments for 30 years to finally end its reliance on international rescues.
The reports came after a former IMF watchdog urged the world’s “lender of last resort” to be more critical of its involvement in many bail-out countries for the sake of the institution’s credibility.
“Few reports probe more fundamental questions – either about alternative policy strategies or the broader rationale for IMF engagement,” said a report from David Goldsbrough, a former deputy director of IMF’s Independent Evaluation Office (IEO).
The International Monetary Fund has come under fire for failing in its duty of care towards Greece by pushing self-defeating austerity measures on the battered economy.
The Washington-based fund has previously admitted it should have eased up on the spending cuts and tax hikes, pushed for an earlier debt restructuring and paid more “attention” to the political costs of its punishing policies during its five-year involvement in Greece.
Accounts from 2010 show the IMF was railroaded into a Greek rescue programme on the insistence of European authorities, vetoing the objections of its own board members from the developing world.
The IMF is prevented from lending to bankrupt nations by its own rules. But it deployed an “exceptional circumstances” justification to provide part of a €110bn loan package to Athens five years ago.
Greece has since become the first ever developed nation to default on the IMF in its 70-year history.
Despite privately urging haircuts for private sector creditors in 2010, the IMF was ignored for fear of triggering a “Lehman” moment in Europe, by then European Central Bank chief Jean-Claude Trichet. Greece later underwent the biggest debt restructuring in history in 2012.
The findings of the fund’s research division have largely discredited the notion that harsh austerity will bring debtor nations back to health. However, this stance has been at odds with its negotiators during Greece’s new bail-out talks where officials have continued to demand deep pension reforms and spending cuts for Greece.
Diplomatic cables between Greece’s ambassador to Washington have since revealed the White House pressed the fund to make vocals calls for mass debt relief to keep Greece in the eurozone during fraught negotiations in the summer.
