NYT — The International Monetary Fund is increasing demands for Greek debt relief, setting up another potential standoff with creditors over the country’s bailout, and threatening to create more political and economic uncertainty at an already tumultuous time for Europe.
This I.M.F.’s position opens the next act in the long-running Greek debt crisis, casting the fund against Germany and many of the other eurozone creditors.
The fund is playing the role of the financial police, adamant that Greece will never return to growth if its debt burden is not sustainable. And Germany is the political pragmatist, leaning on Greece to stick with its austerity commitments lest it set a bad precedent for future bailouts and provoke unrest at home.
The tenor of the debate, while echoing the recent rhetoric, has changed in this latest run. The I.M.F. is now taking a firmer stand ahead of a meeting of eurozone finance ministers next week, by outlining specific demands on the cost and the timing of the debt payments, according to three people who spoke on condition of anonymity.
Whether they represent the fund’s absolute position or a starting point for negotiations, the demands leave Germany in a difficult spot.
If Germany gives too much, Chancellor Angela Merkel’s government will face pressure from the political far right for forcing taxpayers to bear an even bigger burden of Greece’s past profligacy. If it gives too little, the government might not receive the support of the I.M.F. for the bailout, which many German lawmakers have made a condition of further support for Greece. Those lawmakers see the I.M.F. as a guarantor of fiscal rigor.
Unless the two sides find common ground — or agree to further delay the I.M.F.’s participation in the latest bailout — the situation could soon come to a head. Greece needs the next disbursement of bailout money to make billions of dollars of debt payments through July. And the stakes are even higher now, as the region grapples with a renewed wave of terrorism, a migrant crisis and the uncertainty created by a vote in Britain over whether to leave the European Union.
The I.M.F. publicly sounded the alarms on Greece’s debt load last summer, as creditors developed a plan for the bailout of 86 billion euros, the country’s third lifeline since the crisis began seven years ago. Without debt relief, the fund said, it would not participate in the latest rescue. To the fund, Greece’s debt, about 300 billion euros, is simply unsustainable.
The Wall Street Journal reported Tuesday that the International Monetary Fund wants to let Greece skip paying either interest or principal on its bailout loans until 2040. That’s a much more far-reaching rescheduling of its debt than key creditors such as Germany have so far been willing to accept.
The restructuring plan will be a tough sell. There is a sense among the eurozone creditors that the I.M.F. is being overly pessimistic about Greece’s outlook, to help drum up support for debt relief. While European officials have been playing up signs that Greece is bottoming out, the I.M.F. has been more skeptical about the country’s potential to raise revenue, shore up its budget and overhaul its economy.
There is a wide gap on the economic picture. Europeans estimate that Greece will hit a primary surplus — a budget in the black, before debt repayments — of 3.5 percent by 2018. The fund figures it would be closer to 1.5 percent at that point.
“There is a very strong belief in Europe that the I.M.F. is essentially cooking the numbers by being overly pessimistic about political and economic developments in Greece in order to strong-arm Northern Europe into providing more generous debt relief,” said Mujtaba Rahman, the Europe director for the Eurasia Group.
Wolfgang Schäuble, Germany’s finance minister, has said he sees “no argument” for acceding to the I.M.F.’s demands.
But privately, Germany and the European creditors appear to be open to negotiation, given the current environment. When eurozone finance ministers discussed the bailout terms last week, they formally debated, for the first time, ways to ease Greece’s giant debt burden.
“What we’re seeing is another muddling through by the creditors, and that means the I.M.F.’s future role in the program and the related question of debt relief aren’t going to be settled any time soon — and certainly not by next week,” said Carsten Nickel, the deputy director of research at Teneo Intelligence, a political risk consulting firm.
