WASHINGTON — Greece will probably need more money and debt relief from European countries in order to meet the objectives of its bail-out programme, according to a report by the International Monetary Fund (IMF).In a report discussed by the IMF board this week and released on Wednesday, the fund’s staff said 4,4bn Euro of financing has yet to be identified next year under the rescue package it finances with eurozone nations.
In addition, a December commitment by Europeans to provide further debt relief for Greece may require agreeing to measures as early as 2014-15, provided Greece meets its budget targets, they said.
“If investors are not persuaded that the policy for dealing with the debt problem is credible, investment and growth will be unlikely to recover as programmed,” according to the report. “The commitment of Greece’s European partners to provide debt relief as needed to keep debt on the programmed path remains, therefore, a critical part of the programme.”
The IMF’s reminder to Europe comes as Greece’s financial fate has become entwined with German politics, with Chancellor Angela Merkel campaigning for a third term on the promise that Germany will not write off any of the loans made to Greece since the debt crisis hit almost four years ago.
Most of Greece’s debt is held by the Europeans and the IMF after investors took part in history’s biggest debt restructuring last year.
Under the December agreement, the target is for Greek debt to fall to 124% of gross domestic product in 2020, from a peak the fund now sees at 176% of GDP this year. The fund’s board of directors approved the release of a 1,7bn Euro tranche earlier this week. — Bloomberg.