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Old 31st Jul 2013, 15:31
  #3420 (permalink)  
ORAC
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Join Date: Jul 2000
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Eurozone faces 9.6bn hole in Greek finances, warns IMF

The eurozone must plug a 9.6bn black hole in Greek finances and move more quickly to write-off a "substantial" chunk of the country's 282bn debt, the International Monetary Fund has warned.

The IMF's fourth assessment of the Greek bailout programme identifies a 10.9bn "financing gap" over the next two years and urges the eurozone to take losses on loans made to Greece in order to lift it out of a debt trap. As well as finding the extra financing of 4.4bn in 2014 and 6.5bn in 2014, the IMF is asking the eurozone to find additional debt relief for Greece worth some 7.4bn, implying a major re-negotiation of the Greek bailout out before next summer.

"After peaking at around 176 per cent of GDP this year, debt is expected to decline to 124pc in 2020, after additional contingent relief measures of about 4pc of GDP from Greece's European partners to be determined in 2014/15," said the IMF report. Debt sustainability concerns continue to remain a risk. Should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, European partners should consider providing relief that would entail a faster reduction in debt than currently programmed."

The IMF's finding of a "financing gap [that] will open up in August 2014" contradicts denials of a shortfall from the European Commission earlier this month and the Fund's call for a debt write will be a bombshell in German elections. The eurozone is formally committed to debt relief once Greece achieves to primary budget surplus, probably at the end 2013 but Angela Merkel, the German Chancellor, has warned the Greeks against seeking a "hair cut" on the amount it must pay back in loans..............
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