Il International Monetary Fund could not participate in Greece's third bailout plan, the result of Monday morning's agreement between Athens and European leaders. In a document sent to the EU and quoted today by the Financial Times, the IMF explains that the Greek public debt is too high and rising too quickly. As a result, according to the Fund, a renovation is essentialotherwise the new aid plan developed by the EU will prove useless, also because it imposes objectives on the primary surplus front that Athens will never be able to achieve.
In detail - as reported by FT - the Fund specifies that the Greek debt will reach almost 200% of GDP within the next two years, while at the beginning of the crisis – and before austerity – it was 127%. The institution led by Christine Lagarde therefore argues that the debt could become sustainable again for Athens only “through measures that go far beyond those that Europe has so far said it is willing to consider”, as stated in the text.
In particular, the Fund suggests an exceptional extension of the Athens debt repayment plan with a "grace period" of another 30 years on the entire stock of Greek debt, until 2053. Alternatively, according to the IMF, eurozone creditors should guarantee annual transfers to the budget of Greece or predict a deep debt relief.
On the other hand, the rules of the Fund prevent the institution from participating in bailouts of countries that have no possibility of returning to finance themselves on the market due to unsustainable debt. In the past, the IMF has shown flexibility on this rule, but it now seems that it no longer intends to make exceptions.
The point of view of the Fund on the Greek debt is shared also by the US government. Last week Jack Lew, US Treasury Secretary, said that "Greece's public debt is unsustainable" and that "Europe must restructure it."
