Handelsblatt — Finance Minister Wolfgang Schäuble attacked the International Monetary Fund for being too pessimistic about Greece as part of an international row over debt relief that is delaying urgently needed funds.
Mr. Schäuble said disagreements over Greek prospects was the main reason that Euro zone finance ministers failed to agree debt relief terms for Greece last week, meaning that the country has not yet received urgently needed funds from the €86 billion rescue package. The funds would allow Greece to repay €7.3 billion in loans due in July.
“We’re arguing with the IMF about what is the right growth assumption for Greece for the next 40 to 50 years,” Schäuble added.
Mr. Schäuble said the IMF wasn’t prepared to assume that Greece was able to generate more than one percent annual growth over the next 40 years.
If Greece only managed one percent growth, it would unable to raise the taxes to service its debts that amount to €314 billion, close to 200 percent of its GDP.
The IMF argues that Greece’s debt is unsustainable given its weak growth outlook and that it can’t join in the latest EU bailout package unless part of the country’s debt is written off: something Mr. Schäuble is reluctant to do.
The EU lenders — the European Commission, European Central Bank and the European Stability Mechanism bailout fund — want the IMF to join the bailout because it would brings in an outside enforcer to pressure Greece into implementing the reforms being demanded in return for aid.
But Chancellor Angela Merkel, seeking a fourth term in an election in September, doesn’t want to anger German taxpayers, who were led to believe that they are paying for the ‘inefficient Greeks’ out of their taxes.
Sources said new French President Emmanuel Macron and Finance Minister Bruno Le Maire have weighed in by proposing an alternative solution: linking possible debt relief to growth.
If growth improves, Athens would have to repay its debt as planned. But if the economy slows, Greece would be allowed to stretch out payments. Details could be agreed at the June 15 ministers’ meeting, according to the French.
