Greek debt is unsustainable and needs a generous relief, the IMF’s mission chief in Greece Delia Velculescu said on Wednesday.
Addressing an Economist conference in Athens, Velculescu said that the Greek programme was not sustainable as it included very ambitious targets on primary surplus, while reforms are limited in taxation and cutting pensions. On the contrary, she argued that structural reforms were necessary to allow the Greek economy to return to stabilization. Only a combination of all these, will eliminate once and for all any future plans on Grexit. She argued that the Greek debt is clearly unsustainable and that debt relief is necessary, in her appearance at the Economist conference in Athens. She said that the IMF has committed t participate in the funding of the programme but this will happen only after Europe pledge on sustainability of Greek debt. Debt relief measures must be compatible with a sustainability survey drafted by the IMF (by the end of the year) when a discussion on the IMF participation in the programme was expected to begin.
Declan Costello, the European Commission’s representative in the institutions, sounded very optimistic over the success of the Greek programme. He said that a second review of the programme would be demanding and full of challenges. He did not specify the timetable of the review but said that prior actions should be voted by December 11 this year.
Costello reassured there was no risk of a haircut in deposits and noted that a discussion on debt relief measures was moving towards reducing annual servicing costs. He said that the presence of IMF in the programme was of crucial importance to Europe.
“A commitment is a commitment and will honor a commitment on primary surplus to gain credibility,” George Chouliarakis, deputy Finance Minister told the Economist conference, but noted that the government preferred lower primary surpluses for the period after 2018.
“Our preference is that after 2018 we should have much lower primary surpluses, around 1.5-2.0 pct of GDP in the long-term,” Chouliarakis said. He said he expected a second review of the programme to have been completed by the end of October.