Thursday, November 1, 2012

IMF says financing issues main obstacle on Greek talks

The International Monetary Fund said today financing issues remained the main obstacle for debt-laden Greece to receive more bailout money from its international lenders.

Near-bankrupt Greece must push through spending cuts and tax measures worth 13.5 billion euros ($17.5 billion) as well as a raft of economic reforms to satisfy its IMF and European Union lenders and secure a next tranche of aid.

IMF spokesman Gerry Rice said progress had been made and an agreement could come "soon," but discussions continued about the sustainability of Greece's debt.

"The financing for the program has to be consistent with debt sustainability," he told reporters at a briefing in Washington.

The "troika" of Greece's lenders - the IMF, European Central Bank and European Union - is readying a debt sustainability analysis and pondering ways to plug a financing gap if Greece were to reach a primary surplus.

The options included lengthening the maturities and reducing the interest rate on existing loans, an interest payment holiday, letting Greece buy back its own debt at a discount with borrowed money and allowing it to issue more short-term T-bills.

According to its mandate, the IMF cannot allow lower interest rates on its existing loan to Greece. But Rice said a debt buy-back would be an option, as long as it was actually a "meaningful reduction" in Greek debt.

He also said the IMF also supported giving Greece more time to reduce its deficit.
"We've said before we think there's a good case for extending the period of time for Greece to reach its fiscal targets," Rice said.