International Information Centre for Balkan Studies

Greece may skip IMF loans to exit aid curbs




Finance minister Gikas Hardouvelis signaled Greece may forego International Monetary Fund emergency loans in 2015 and 2016 in order to secure an exit from the terms of its bailout.

“The IMF doesn’t want to lend alone; the Europeans feel itchy about the IMF lending and them staying out,” Hardouvelis, told Bloomberg TV. “All possibilities are up for grabs.” He declined to say what kind of solution Greece and its creditors will opt for.

While the euro-area’s support program for Greece expires this year, the IMF is scheduled to continue disbursing funds until the first quarter of 2016. Prime Minister Antonis Samaras is agitating to end the 240 billion-euro ($310 billion) bailout which came with strict conditions that fueled a political backlash and exacerbated a recession that has wiped out about a quarter of the economy.

Samaras has said on several occasions this year that the end of bailout agreements is near as Greece regains market access.

One option that Hardouvelis did rule out is a writedown on the nominal value of Greek debt.

“About 70 percent of the Greek debt is held either by the ECB or the other countries, so you can’t write it down,” said the Harvard-educated economist, who was an adviser to then Prime Minister Lucas Papademos in 2012 when Greece persuaded its private creditors to accept about 100 billion euros of losses, in the biggest restructuring in history.

Most-Indebted Nation

“You can extend the maturities, you can fix part of the variable rate of debt, but writing it down, that would have to go through various parliaments,” he said. “No one would accept that.”

Even after its restructuring, Greece remains the most indebted state in Europe, with liabilities of about 175 percent of its gross domestic product. The country’s euro area partners have committed to ease repayment terms on bailout loans, if this is necessary to bring its debt down to a sustainable path, and provided that Greece continues abiding with a set of agreed economic overhauls.

Syriza, Greece’s main opposition party, which won the European parliament elections in May and is ahead in every opinion poll has pledged a more aggressive debt restructuring. The party has also said it will force snap elections next February, when a parliamentary super-majority is required to elect a new President of the Republic.

Snap Elections

“The fear of snap elections is not there. The population doesn’t want snap elections” said Hardouvelis, who is also a professor of Finance at the University of Piraeus. “Investors think long term and they see no downside risk to Greece. The presidential elections are a minor nuisance.”

The so-called Troika of the European Commission, the European Central Bank and the IMF, to which Greece has surrendered control of its economic policy, projects that the country will emerge this year from a six-year recession that left more that a quarter of the country’s workforce without a job. Hardouvelis shared this view, saying that privatizations are speeding up, the country has become a global champion in economic reforms and investors are willing to bet on its recovery.

Source: Bloomberg





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