IMF: European lenders need to proceed with a significant restructuring of Greece’s debt

Greece’s European lenders need to proceed with a significant restructuring of the country’s debt to make it sustainable, the Director of the IMF’s Fiscal Affairs Department, Vitor Gaspar, said on Wednesday, during the presentation of the Fund’s October Fiscal Monitor report.

Asked on the issue, Gaspar said the IMF supports the efforts for structural reforms and adjustments in politics in order to achieve realistic goals. These goals, he added, require that Europeans accept a request to restructure Greece’s public debt.

In the Fiscal Monitor report, the IMF predicted significantly lower primary surpluses than those envisaged in the Greek programme. It predicted that Athens would not meet a targeted primary surplus of 3.5 pct of GDP in 2018, while Greece’s primary surplus was unlikely to exceed 1.6 pct of GDP before 2021. This essentially pushes back any decline in the country’s debt until after 2019, with the IMF forecasting that public debt will reach 183.4 pct of GDP in 2016, peak at 184.7 pct in 2017 and 2018 and subsequently drop to 178.5 pct in 2019 and 169.2 pct in 2021.

According to the IMF, Greece was unlikely to meet the target primary surplus of 0.5 pct of GDP in 2016, contrary to government estimates that the year will end with a primary surplus of 0.63 pct. It sees the primary surplus reaching 0.1 pct of GDP in the current year and ‘sticking’ at 0.7 pct of GDP in 2017, in spite of strong growth targets of 1.75 pct. It forecasts primary surpluses of 1.6 pct of GDP from 2018-2020, falling to 1.5 pct of GDP in 2021.

The report does concede that Greece achieved a primary surplus of 0.7 pct of GDP in 2015, following confirmation by Eurostat, even though IMF Managing Director Christine Lagarde had originally disputed this figure last spring.