Debt Relief for Greece
IMF proposes to fix the interest rate for 30 or 40 yearsMay 17th, 2016
The International Monetary Fund is pushing the Eurozone to let Greece skip paying interest on bailout loans until 2040. The international financial institution wants that the loans to Greece fall gradually in the following decades, saying that the deadline might be as late as 2080. This demand though, exceeds the will of Greece’s European creditors, particularly Germany. The IMF’s proposal was presented to Eurozone governments last week, and it was hardly criticized.
According to this plan, Greece’s annual debt-service needs would go below 15% of its gross domestic product. On the other hand, the Eurozone governments-led by Germany-are not favorable on making these concessions on their loans to Greece. Germany in particular, wants to the IMF to rejoin the Greek bailout as a lender. So far, the IMF has not yet signed up to the Greek program agreed last summer. The German Chancellor Angela Merkel and her lawmakers think that the Eurozone would not be able to enforce vigorous fiscal and economic examinations in Greece in return for loans.
In Berlin, the European Commission is seen as too soft regarding the financial situation in Greece. Moreover, many European officials hope for a deal by the time Eurozone finance ministers meet (May 24th), but some negotiators believe that more time will be necessary. German and other Eurozone officials are in negotiations with the IMF aimed at finding a formula that would assure the IMF that Greece’s debt will be restructured, while letting Germany delay final decisions until 2018. After seven years from the major crisis, Greece is still struggling to recover, and this could be already a reason why a further payment extension is dangerous.
Cultural Diplomacy News
Paola Pluchino, CD News