On Monday 6 February, following a meeting of its governing council, the IMF acknowledged that it is divided over the Greek debt.
In a press release, the Washington-based institution explained that the directors had differing opinions over the budgetary trajectory and viability of the debt.
“Most directors agreed that Greece does not require further fiscal consolidation at this time, given the impressive adjustment to date which is expected to bring the medium-term primary fiscal surplus to around 1.5% of GDP, while some directors favoured a surplus of 3.5% of GDP by 2018”, the IMF went on to explain.
The Europeans and the Washington institution are in disagreement over the outcome of the budgetary effort made by Athens and the duration of the effort that Greece must achieve post-2018, the year in which it is scheduled to come out of its third bailout plan. The IMF takes the view that with the measures agreed in the Greek economic adjustment programme, the country will only manage a primary budgetary surplus (not including servicing of the debt) of 1.5% of GDP by 2018, whilst its target has been set at 3.5%. One of two things will have to happen: either Greece needs to take more measures to secure resources to reimburse its debt, or the Europeans will have to agree to greater debt relief for Greece.
The IMF is not able to come on board an aid plan if the government debt of the country under assistance is not considered viable in the medium term. However, in a report published by the Financial Times, the IMF believes that the Greek debt is on an "explosive" trajectory. According to the Fund's forecasts, Greek debt will stand 170% of GDP in 2020 and 164% in 2022, “but become explosive thereafter”, to stand at 275% of GDP by 2060.
“Most directors considered that despite Greece's enormous sacrifices and European partners' generous support, further relief may well be required to restore debt sustainability. They stressed the need to calibrate such relief on realistic assumptions about Greece's ability to generate sustained surpluses and long-term growth”, the IMF explained.
The European Commission has taken note of the IMF's statements. Its priority is to conclude the second monitoring mission of the third bailout plan. (Original version in French by Élodie Lamer)