EUROZONE-GREECE/IMF REPORT IMF warns Greece needs debt extension, may require writedown

Record ID: 148651

  • Title: EUROZONE-GREECE/IMF REPORT IMF warns Greece needs debt extension, may require writedown
  • Date: 2nd July 2015
  • Summary: WASHINGTON, D.C., UNITED STATES (JUNE 29, 2015) (REUTERS) EXTERIOR OF INTERNATIONAL MONETARY FUND (IMF) "INTERNATIONAL MONETARY FUND" ETCHED IN STONE
  • Embargoed: 17th July 2015 13:00
  • Keywords:
  • Location: Greece
  • Country: Greece
  • Topics: General
  • Reuters ID: LVA9OXOLJ2UN7ZDQECH76WCUOJ17
  • Aspect Ratio: 16:9
  • Story Text: The International Monetary Fund warned on Thursday (July 2) that Greece would need an extension of its European Union loans and a potentially a large debt writeoff if it grows more slowly than expected and economic reforms are not implemented.
    The IMF warning in a preliminary draft of its latest debt sustainability report came as Greece readies for a Sunday (July 5) referendum on an international bailout deal that Prime Minister Alexis Tsipiras has urged voters to reject.
    The Washington-based institution, which is part of a "troika" that includes the European Commission and European Central Bank that is overseeing the bailout, said that even if Greek policies came back on track, loans made by Europe "will need to be extended significantly" and that the country would need further concessional financing.
    The report was made based on assessments last week, before Greek banks have been closed and the country had defaulted on an IMF repayment.
    The IMF said Greece would need an additional 36 billion euros ($39.89 billion) in European funding from total additional financing needs of 50 billion euros due to policy slippages and the latest proposals from Athens.
    Even under the most optimistic current IMF projection and with concessional financing through 2018, it said Greece's debt to gross domestic product ratio was seen at 150 percent in 2020 and 140 percent in 2022.
    "Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30 percent of GDP would be required to meet the November 2012 debt targets," the Fund said.
    The Fund believes that given the fragile debt dynamics of Greece, one option would be to extend the grace period to 20 years and the amortization period to 40 years on existing EU loans and to provide new official sector loans to cover financing needs falling due on similar terms at least through 2018.
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