Defer Greek repayments to 2040, IMF urges

Protesters in Athens on May 8 at a rally against the latest reform measures demanded by Greece's creditors. IMF's debt- restructuring proposal goes much further than plans advanced by euro-zone creditors locked in talks to trigger Greece's next aid p
Protesters in Athens on May 8 at a rally against the latest reform measures demanded by Greece's creditors. IMF's debt- restructuring proposal goes much further than plans advanced by euro-zone creditors locked in talks to trigger Greece's next aid payout. PHOTO: AGENCE FRANCE-PRESSE

Creditors to meet on debt relief options next week; EU reluctant to take up IMF proposals

BERLIN • The International Monetary Fund (IMF) proposed that Greece should not make payments on its European bailout loans until 2040, underscoring key differences with euro-zone lenders over the future of the Greek economy.

The Washington-based fund's debt-restructuring proposal, contained in an IMF document obtained by Bloomberg News, goes much further than anything advanced by euro-zone creditors, who are locked in talks to trigger Greece's next aid payout.

Finance ministers from the currency union will meet next Tuesday in Brussels to discuss the debt relief options.

The IMF wants all payments on European loans granted to Greece since its first bailout in 2010 to be deferred until at least 2040, with maturities extended until 2080, according to the note.

Interest payments on loans from the euro zone's crisis fund would be fixed at a maximum 1.5 per cent until at least 2045.

The IMF's projections for the Greek economy rely on a baseline assumption that debt will rise to 293.8 per cent of gross domestic product by 2060 without the proposed measures.

An IMF spokesman declined to comment on the debt analysis.

Greece's creditors, including the euro zone and the IMF, are struggling to put the finishing touches to their assessment of measures implemented under the terms of Greece's third bailout, which would pave the way for a new aid payout.

The IMF has made its participation in the programme contingent upon debt relief, a prospect euro-zone finance ministers began discussing last week.

Germany leads a group of nations that want IMF participation in the Greek rescue, while also resisting the fund's calls for a deeper debt restructuring. "The details of the debt-relief package would need to be agreed upfront," IMF staff wrote in the document, even as European governments want to delay most elements of a restructuring agreement through next year.

"The delivery will need to be comprised of an upfront component and a conditional component based on policy implementation."

A debt sustainability analysis prepared by the European institutions did not go as far as the IMF proposal, seeking an interest-rate cap of 2 per cent to be in place until 2050 and extending the maturity on the loans by an average of five years, according to a copy of that document.

The IMF's document also says that Greece will raise €5 billion (S$7.8 billion) from privatisations between last year and 2030, while the country's banks are forecast to need an injection of capital.

Dutch Finance Minister Jeroen Dijsselbloem said yesterday that he was hopeful the European Union would reach a deal with Greece at the meeting of his counterparts next week.

"We're in a completely different situation than we were a year ago," said Mr Dijsselbloem, who also chairs the group of euro-zone finance ministers.

"Hopefully next Tuesday in the next euro-group meeting, we'll get that deal that I think Greece needs and deserves," he added.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 21, 2016, with the headline 'Defer Greek repayments to 2040, IMF urges'. Print Edition | Subscribe