IMF Official’s Statement “Greece will Need 3. Bailout” Angers Greek FinMin and the IMF

Posted by in Economy

The statements of Greece’s representative to International Monetary Fund annoyed Athens. “Greece will need a third bailout” Thanos Catsambas said in an interview to Wall Street Journal published on Thursday. Prompt was the angry answer by Finance Minister Yiannis Stournaras to said – more or less -Catsambas has nothing to say on the issue. In the same wave length was also the comment by the IMF.
 
Catsambas, assigned to IMF by Papademos government on January 2012, felt the pressure of the Greek politics. He issued a press release, where he says that there was never talk about a “third bailout” during the interview.
 
 Catsambas who follows very close the IMF Greece relations revealed also that Papademos government had managed to meet “only 22% of the commitments under the troika-supported program were implemented.”
 
Catsambas prediction of a third bailout angered the Greek government and prompt was the answer of finance minister Yiannis Stournaras who told Reuters: “The country΄s positions are formulated by the Prime Minister and the Finance Minister.”
 

IMF official: Greece will need third bailout

Greece will need a third bailout package from the euro zone, and the country΄s European creditors will have to find the money for it, according to a senior International Monetary Fund official.”Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favorable terms,” Thanos Catsambas, an IMF alternate executive director, who represents Greece at the Fund΄s board, said in an interview.
….
The creditors are unanimous that this is Athens΄ last chance if the financing is to continue. Without the loan payment, the government would run out of cash in a matter of weeks and would have to find new ways of meeting its current obligations, such as pensions and public-sector wages. In an extreme scenario, this may require leaving the euro zone and printing a new currency.

Mr. Catsambas called this last option “an undesirable eventuality that will set the country back many decades.”

Mr. Samaras has asked his euro-zone partners for a two-year extension to meet budget deficit reduction targets, something that would create an extra €20 billion funding gap for the period. The government has explored funding this with increased issuance of shorter-term treasury bills, thus avoiding direct extra financing from its creditors, but Mr. Catsambas said it would be “totally unrealistic” to assume that Greece could fill the gap entirely on its own.

Mr. Catsambas insisted that it should be the euro zone and ECB that take the strain of filling the rest of the gap.

“Extension of repayment of the IMF [part of] loans is impossible as all terms and conditions of IMF loans to all countries are based on rules that are not negotiable,” he said. The failure of Greece to implement its agreements, and the lack of a sustainable debt trajectory, make it impossible for the IMF, under its own charter, to lend any more.

Mr. Catsambas said that the previous coalition government under Lucas Papademos, who took over from George Papandreou in November last year, estimated that “only ” in 2011. Mr. Catsambas noted that the public sector still needs to be shrunk as a result.

One option to restore Greece΄s debt trajectory to health would be another cut on the interest rate it pays on loans from euro-zone governments. More controversial options include having the ECB and euro-zone national central banks accept a rescheduling of their debts over a much longer period. The most controversial option would be for a 30% reduction—or haircut—in the value of their Greek bonds, said one official familiar with the discussions.

Another scenario calls for euro-zone governments to accept haircuts on bilateral loans they made to Greece that could amount to between €30 billion and €50 billion.

But no euro-zone creditor has signaled any intention to lend more money to Greece and the Eurosystem has shown no willingness to restructure its €50 billion portfolio of Greek debt, a step that would be a public-relations disaster for a central bank keen to reassure the German public and government that it won΄t print money simply to fund public deficits.

Mr. Catsambas acknowledged that such official-sector involvement, or OSI as it is known, would be difficult to agree, however necessary it may seem.

“The difficulty with OSI is that it sets a possible precedent for other borrowers, which, of course, euro-zone countries and the ECB would rather avoid,” he said.

Greece denies report it will need third bailout

Greece΄s Finance Minister on Thursday denied a report citing the country΄s representative to the IMF as saying Athens would need a third bailout package.

“The country΄s positions are formulated by the Prime Minister and the Finance Minister,” Yannis Stournaras told Reuters. (via Capital.gr)

It looks that not only Stournaras got angry but also the IMF was not pleased about  Catsambas’ statements. IMF sources said that “Catsambas does not represent the IMF’s views”. Gerry Rice, the spokesman of IMF,  also dismissed Catsambas claim not no program extension and said that “there were good arguments” for the extension of the program beyond the set time limits.