Eurogroup today with debt relief still unresolved

The International Monetary Fund has called Europeans to provide upfront and unconditional debt relief for Greece.

In a debt sustainability analysis report released by IMF, it said that Greece’s current budget surplus and growth targets for its bailout program are unrealistically high and should be revised downward, adding that Greece’s debt needs to be restructured.

Few countries have ever managed a 3.5 percent primary budget surplus for long, the report said as Reuters writes.

“In view of this, staff believes that the DSA should be based on a primary surplus over the long run of no more than 1.5 percent of GDP. This target would in staff’s view be within the realm of what is plausible,” the IMF report said.

As detailed talks begin on Tuesday to resolve a long-running stand-off with Berlin, the IMF signalled it would be standing its ground, calling for European creditors to forgo any Greek debt payments until 2040 and, most controversially, to fix interest rates at 1.5 per cent over that time in a move that could require other eurogroup members to plug yet more Greek gaps in the future, the Financial Times report.

While officials involved with the talks were upbeat about a deal taking shape that could be completed on Tuesday, negotiators have dug-in on specifics. Some eurozone officials are also disappointed Christine Lagarde, the IMF director and a key figure in brokering previous political deals over Greece, will be in Kazakhstan and unable to attend.

Analysts said the move to release the paper ahead of Tuesday’s eurogroup meeting was controversial but also a sign of the pressure Mrs Lagarde and the IMF’s staff were under from its non-European members to abide by the Fund’s rules and not to grant Athens or its European creditors any special treatment, FT adds.