Greek debt to badly miss 2020 target: IMF report
By Jan Strupczewski ,Reuters
October 27, 2012, 12:01 am TWN
BRUSSELS -- Greek debt will be above the target of 120 percent of GDP in 2020, a preliminary report by the IMF showed on Thursday, and Athens will need more reforms before emergency credit from international lenders can start flowing again.
Excerpts from the International Monetary Fund (IMF) report were presented to the Eurogroup Working Group (EWG) — junior finance ministers and treasury officials who prepare meetings of eurozone finance ministers.
“It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatization,” a eurozone official, who insisted on anonymity, said.
“New prior actions will be needed, on top of the existing 89,” the official said, referring to a list of already agreed reforms that need to be in place before any new tranches of eurozone and IMF emergency loans to Greece can be paid.
Apart from the debt projections, representatives of the IMF, the European Commission and the European Central Bank — known as the troika — have been calculating how much more money Athens will need if it is given until 2016 rather than 2014 to reach a primary surplus of 4.5 percent, as agreed in February.
A primary surplus or deficit is the budget balance before the government services its debt. In Greece's case, it would mean government tax revenues exceeding spending, meaning Athens is beginning to get on top of its budget-deficit problems.
The two extra years would give the fast-contracting Greek economy some welcome respite, allowing it to return to growth sooner and therefore increasing the chances the country would eventually be able to make its debt sustainable.
“Additional financing needs for Greece are now seen at around 30 billion euros (US$39 billion),” the official said after the EWG meting. Estimates from various officials since July varied from 13 billion to 30 billion and on Thursday another official estimated the financing needs at 16-20 billion euros.
The critical question is where the additional money would come from.
“The IMF is pushing for OSI (Official Sector Involvement) in Greece, Germany is strictly against. And they are not the only ones,” the eurozone official said.