IMF now pushing for restructuring of Greece's debt
Published 18/04/2011 | 05:00
The International Monetary Fund believes Greece's debt is unsustainable and that the country's government should consider a restructuring as early as next year.
In what is seen as a dramatic shift in opinion, senior IMF officials have told European Commission and eurozone governments that a restructuring should be considered.
The IMF, which hasn't recommended a restructuring of all the country's debt, has considered extending its loan repayment schedule, IMF spokesman William Murray said.
Eurozone officials, including finance ministers, have said it is necessary to restructure Greece's debt, and the European Central Bank responded by saying it didn't want a public discussion, an unidentified official familiar with the situation said.
A first step would be to substantially extend Greek bond maturities, another unidentified official said, according to reports.
That may include extending debt repayments by as much as 30 years, the official said.
Meanwhile, the IMF's steering committee said the IMF should offer recommendations for national policies that spur excessive flows of capital into other economies as well as policies that seek to temper them.
"Giving due regard to country-specific circumstances and the benefits of financial integration, such an approach should encompass recommendations for both policies that give rise to outward capital flows and the management of inflows," the panel of IMF member nations said.
The International Monetary and Financial Committee, a group of finance officials from around the world, said the global economy was strengthening but that policy action was needed given "significant risks" threatening the recovery.
"Credible actions are needed to accelerate progress in addressing challenges to financial stability and sovereign debt sustainability, and to ensure timely fiscal consolidation in advanced economies," the committee said. It also said steps were needed to prevent an inflationary overheating of emerging market economies and to deal with risks posed by higher commodity prices.
Meanwhile, a nationalist party that rejects bailouts for countries such as Greece, Ireland and Portugal is expected to make strong gains in Finland's election, but remains unlikely to join the next government.
Finland held a general election yesterday and the the opposition True Finns party, which opposes rescue funds for what it calls Europe's "squanderers," quadrupled its support since the last election, and is poised to finish among the top four.
The True Finns' rise has led to worries in eurozone economies over whether they can count on Finland's support for bailout funds, which must be unanimously approved by the 17 countries using the euro.
However, recent surveys show the nationalists aren't likely to get enough support to break up the current pro-bailout government -- a four-party coalition led by Prime Minister Mari Kiviniemi's Centre Party and the conservative National Coalition Party.
True Finns leader Timo Soini believes his party is now big enough to deserve seats in the next government, though he realises his stance on European rescue funds is problematic for other parties.