The IMF on Friday issued an indirect but clear response to Eurogroup president's earlier comments over the sustainability of Greek debt, with Poul Thomsen, the head of the International Monetary Fund's European department saying that Greece cannot deal with its public debt through reforms alone and needs a significant extension of grace periods and longer maturities from its European creditors.
Thomsen, who served as a head of the IMF's delegation to Greece, said that the risk of a resurging Greek crisis has been significantly contained following a new agreement signed by the Greek government in the summer. He noted that the Greek government seemed ready to discuss all necessary reforms and underlined that the reform agenda in Greece, particularly in the pension and fiscal fields, was large enough. However, he noted "we welcome the Greek government which seems to realize this necessity".
"We think that Greek debt... has become highly unsustainable," Poul Thomsen told a news conference in Lima, on the sidelines of a meeting of the IMF. "We think that Greece cannot deal with its debt without debt relief. Greece cannot deal with debt just through reforms and adjustment," he said.
Thomsen said that the discussion on how to provide debt relief to Greece has shifted from a nominal haircut on the stock of its debt to capping gross financing needs and noted that "what the exact targets should be, we will have to discuss, but there is no doubt in our mind that if Europe wants to go the route of providing relief by lengthening the grace period and lengthening the repayment period, we are looking at a significant lengthening of the grace period and significant lengthening of the repayment period," Thomsen said.
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