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, the head of the International Monetary Fund’s European department said.
The European Commission has forecast in May that Greek debt would reach more than 180 percent of its gross domestic product this year and euro zone governments, the main creditors of Greece, have promised to start debt relief talks later this year, once Athens implements agreed reforms.
“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.
he chairman of euro zone finance ministers told Reuters on Thursday that there was broad support for capping Greece’s financing needs at 15 percent of GDP annually.
“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.
