Bloomberg News

IMF Stands by March Comments Greece May Need More Aid

July 26, 2012

The International Monetary Fund stands by comments made in March, when it said that Greece may need more aid from Europe or further debt restructuring if the country’s loan program goes off track, a fund spokesman said.

“Assessing debt sustainability is always part of our work and our discussions with any countries where a program is in place,” IMF spokesman David Hawley told reporters at a press conference today. “That is work that continues in Greece.”

Greece is seeking to secure more time to implement reforms and budget cuts under a second, 130 billion-euro ($160 billion) bailout after holding elections in May and June amid growing public opposition to austerity. As international creditors meet authorities in Athens this week, some euro-region countries including Germany have signaled reluctance to put up more funds should Greece fail to meet its targets.

Hawley said that the discussions on the Greek program would continue into September. When asked about the IMF position on Greece compared with the March report, he said it “has not changed.”

“In the event of slower progress in policy implementation, or failure of the economy to respond rapidly enough to reforms, completion of reviews may require additional support from Greece’s European partners on yet more concessional terms than currently envisaged, and/or another restructuring of bonded debt,” the IMF staff wrote in the report published March 16.

Implementation Delays

IMF spokesman Gerry Rice earlier this month had indicated the program had fallen behind, mentioning “policy implementation delays in a number of areas.”

Asked about comments by European Central Bank President Mario Draghi today, who said policy makers will do whatever is needed to preserve the euro, Hawley said they are “a welcome reiteration of the ECB’s well-known commitment” to support the region.

Financial markets surged on speculation the ECB will act to lower Spanish borrowing costs after yields on the nation’s bonds rose to levels that prompted bailouts for Greece, Portugal and Ireland. The ECB started buying Spanish and Italian debt in August last year as part of its bond purchase program.

The IMF still sees a need for further rate cuts in the 17- country euro region and “unconventional support,” Hawley said.

In Spain and Italy, the IMF’s “main message is that in both countries important policy measures have been announced and implementation is key,” Hawley said. The IMF’s annual assessment of Spain’s economy will be published tomorrow, he said.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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