IMF urges EU to stump up extra cash for Greece
Fund says that 'unproductive debate' about bondholder haircuts must be brought to an end
Published 21/06/2011 | 05:00
The IMF has urged eurozone countries to stump up extra cash for Greece and refrain from "unproductive" arguments about possible bondholder haircuts.
In a report on the economies of the 17 countries making up the single currency zone, the Washington-based fund warned the eurozone to "bring the unproductive debate about debt re-profiling or restructuring to a closure quickly" and avoid the impression that losses will be forced on investors as a condition of future loans.
"While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," the fund said yesterday, after calling for a "truly cohesive approach" to deal with the eurozone's money troubles.
The criticisms came after eurozone finance ministers failed to release a €12bn portion of EU-IMF aid that Athens needs to pay off maturing debts in July and August.
The money will only be paid out once the Greek parliament has put through a €28bn austerity plan and begun a €50bn round of privatisations, with relevant laws due to be passed in Athens before the end of June.
"In contrast to Ireland and Portugal, who appear to have a high degree of internal political consensus, Greece's national unity has become a prerequisite for our partners," Greece's new finance minister Evangelos Venizelos said in a statement yesterday.
Finance ministers have said they will sign off on the aid tranche during a further emergency meeting on July 3, provided the Greek vote goes through.
"It's clear that the debt is sustainable but the debt will only remain sustainable if Greece complies with all of the commitments entered into," said Luxembourg's prime minister, Jean-Claude Juncker, who heads up the 17-country eurozone.
The IMF had previously said that it would only stump up its €3bn share of the money if eurozone countries agreed to extra support for Greece.
IMF acting chief John Lipsky said yesterday that he wanted "assurances" from eurozone countries that Greece would be funded through 2012.
"We will all require assurances that the programme is financed and that involves assurances from our eurogroup partners that adequate financing is available -- that needs to be done before we can move forward and we are hopeful that those conditions will be met with alacrity," he told reporters in Luxembourg.
Talks on a second bailout for the beleaguered Mediterranean state, which is faltering under a €345bn debt mountain, have gathered pace, with Germany last week coming around to a plan that would encourage Greek bondholders to "voluntarily" roll over their maturing debt.
EU economics chief Olli Rehn said there was an "increasing convergence of views" around a "Vienna initiative" first used to save eastern European banks from collapse in 2009, which is supported by France and the European Central Bank.
A stumbling block in the way of a potential deal has been how to convince ratings agencies that the move would not constitute a Greek default.
Mr Juncker said: "It is absolutely clear . . . that no pressure will be put on the financial institutions, so as to avoid a selective Greek default. Voluntary means voluntary so we hope that there will be a voluntary rollover."
An agreement on private sector involvement should be forged at a further meeting on July 11.