The International Monetary Fund (IMF) expressed its concerns as to the long-term sustainability of the Greek debt in its debt sustainability analysis that was part of a report on Greece carried out under article IV of its statutes and published on Tuesday 31 July.
This report is particularly relevant just over a month after the meeting of the Eurogroup that approved Greece's exit from the third and final bailout plan on 20 August and defined the post-programme supervisory framework, together with debt relief measures (see EUROPE 12046).
Readers may recall that amongst other things, these measures provided for a ten-year extension of the maturities of the loans of the European Financial Stability Facility (EFSF) as well as a further moratorium, from 2022 to 2032, on the reimbursement of loans taken out with the EFSF. By 2020, Athens will also receive the profits made by the European Central Bank (ECB) and the national central banks under the SMP and ANFA government debt buyback schemes. Finally, the interest rate margins attached to the debt buyback tranche of the second bailout plan were written off.
Although the IMF executive directors welcome these debt measures and their contribution to improving the medium-term viability of the debt, they have greater doubts as to its long-term sustainability. This is because they consider that the Eurogroup growth and primary budgetary surplus (not including servicing of the debt) forecasts were excessively optimistic.
The average Greek nominal growth rate referred to by the Eurogroup up to 2060 is 3.1% of GDP a year on average and the primary budgetary surplus is 3.5% of GDP up to 2022, followed by an average of 2.2% until 2060. For political reasons amongst others, the IMF forecasts nominal growth of 2.9% of GDP on average and a primary budgetary surplus of 1.8% of GDP on average between 2023 and 2060.
However, the report welcomes the commitment made by the Eurozone financial policy-makers to include a revision clause in the agreement, allowing them to take stock of the viability of the Greek debt in 2032, to determine whether further measures will be necessary. However the document implies that changes in political orientation in the member states over the next 40 years may have negative repercussions of their commitment to support the Hellenic Republic financially, which will have a knock-on effect on the sustainability of the debt and Athens' access to the markets in the long term. (Original version in French by Lucas Tripoteau)