WASHINGTON, D.C. – As Greece is building a case it needs relief from 240 billion euros ($327 billion) it owes international lenders, one of them is already balking.
International Monetary Fund Managing Director Christine Lagarde, whose agency, along with the European Union and European Central Bank makes up the Troika of the EU-IMF-ECB that put up two rescue packages to save a Greek economy ruined by generations of wild overspending, said she’s not sure Greece should get a debt break.
“I would not pass judgment on whether or not debt relief is or is not needed or what form the European support will take,” she told journalists in a briefing. “I think the jury is out.”
Lagarde said lenders would have a clearer picture of the issue following the fifth review of Greece’s adjustment program, which is due to start in mid-September.
“The first step is to examine the country’s debt sustainability based on the primary surplus which has been identified and to see what we can expect going forward,” she said.
Troika inspectors will come back to Athens a couple of weeks after its envoys will meet Greek officials – in Paris, not Athens – from Sept. 3-5 to talk about the prospects of debt relief.
Prime Minister Antonis Samaras, pointing to a 1.5 billion euro primary surplus and successful sale of a 3-billion euro bond – the first in five years – said that’s enough for Greece to get a restructuring of its loans or even a so-called “haircut” allowing it to walk away from a big chunk of what it owes.
That would pass on the costs to the taxpayers in the other 17 Eurozone countries and German Chancellor Angela Merkel, whose country puts up much of the loans and who demanded harsh austerity in return, has already ruled that out.
Lagarde, the former French finance minister, also has said her agency won’t go along with any debt write-down for Greece, limiting the government’s prospects for a deal.
Three years ago a previous Greek government with Evangelos Venizelos as finance chief stiffed private investors, including those in the Diaspora who put up much of their savings to buy Greek bonds, with 74 percent losses.
He is now the PASOK Socialist leader and Deputy Premier/Foreign Minister in the coalition headed by Samaras, the New Democracy Conservative leader, positions he got after backing more pay cuts, tax hikes, slashed pensions and worker firings.
The government said moving the talks to Paris was a sign that the country is no longer under “intense pressure” to make austerity measures.
Government spokesman Sofia Voultepsi said the venue had been changed from Athens at the government’s request to avoid disruption from protests and strikes, and signals that Greece’s economy is recovering.
“The (inspectors) have no reason to be here,” Voultepsi said. “Our program is on course and … our economic output is set to start growing for the first time in many years.”
Despite the bailouts and debt-write down on private investors, the country’s debt is still a staggering 320 billion euros, about $420 billion, and 174 percent of Gross Domestic Product (GDP.) The Troika wants that cut to 122 percent by 2020, a target many analysts doubt can be met.
Greece slid into recession in 2008 and needed a massive international bailout two years later to avoid default. Draconian public spending cuts demanded by rescue lenders resulted in often tense meetings between the government and debt inspectors who paid regular visits to Athens.
Greece’s left-wing SYRIZA opposition party described the venue change as a “maneuver” to avoid public attention on ongoing austerity measures.
Though no longer facing the threat of imminent bankruptcy, Greece still relies on rescue loans and is hoping for concessions from other Eurozone members to make its runaway national debt sustainable.
On July 29, the government submitted legislation to parliament, continuing a tax administration overhaul that had been demanded by bailout creditors.
(Material from the Associated Press was used in this report)