Athens Macedonian News Agency: News in English, 16-05-18

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From: The Athens News Agency at <http://www.ana.gr/>

CONTENTS

[01] IMF should be paid off early, top Brussels analysts Gros and Darvas tell ANA-MPA

[01] IMF should be paid off early, top Brussels analysts Gros and Darvas tell ANA-MPA

ANA-MPA: The Eurogroup on May 9 calls for a settlement of the debt on three levels: short-term, medium-term and long-term. Do you believe this approach is adequate for relieving Greek debt?

Gros: The approach is more or less the same as that followed until now. If Greece meets all the prerequisites, then there will be a restructuring of the debt. At this time, the interest payments on the loans paid by Greece are already so low and their repayment periods so long that the margins for improvement are limited. Therefore, I think that, even when the programme has ended, Greece's return to the markets will be more expensive than what it gets from the European Stability Mechanism (ESM) and other official creditors. It doesn't make sense for Greece to pay the official creditors and then find new money that is much more expensive. This will cost a great deal for Greece but also for the creditors. Greece will not need money if it achieves primary surpluses, it will not need to finance its deficits and, if something must be paid, it will be the private debt that has matured. The official debt has not matured. For this reason, I consider that the private debt must be replaced by official debt. This does not necessarily mean new money, it means a different, cheaper form of debt.

Darvas: Without a large nominal haircut of Greece's debt, it is not logical for someone to assume that Greece can return to borrowing from the markets at the end of the programme, in the second half of 2018. This is because of the high level of debt and all the uncertainties that surround the Greek economy. The Eurozone finance ministers, therefore, must choose between a 'haircut' and some sort of fourth programme. In each case, the creditor-debtor relationship between the Eurozone partners and Greece will remain for many decades to come.

ANA-MPA: In the last weeks, we have seen the countries of the Eurozone distance themselves from a possible IMF participation in the Greek programme. Why do you believe this is happening? Will the IMF participate financially in the Greek programme after the completion of the first review, in your opinion?

Gros: I believe that in the end the IMF will go home. The irony is that if the IMF goes home, the Greek debt will become much more sustainable, even according to the IMF's own parameters. Because the interest rates go down and the maturity goes up but there is already an earlier maturation. It is a matter of time before the IMF says it wants to leave for political reasons, even though it makes a lot of money, and for the Europeans to say we don't want the IMF to leave for political reasons but if it leaves we save a lot of money, therefore "so long".

Darvas: In the letter from the IMF managing director to the Eurozone finance ministers that was leaked to the press, Christine Lagarde asks for a restructuring of the debt and much less economic austerity that that foreseen in the Greek programme. Nevertheless, the Eurozone finance ministers are opposed to both these proposals and confirmed the fiscal targets of the programme at the May 9 Eurogroup. Therefore, I consider the IMF's participation in the third programme very unlikely.

ANA-MPA: ESM CEO Klaus Regling has proposed buying a part of Greece's debt to the IMF. Do you believe this option is possible from a political point of view?

Gros: It is a very good proposal that is in the economic interests of the Europeans. They must decide what is more important to them: The political issue or the high interest rates paid to the IMF, which are actually a significant sum?

Darvas: I consider that for the Eurozone to buy up the Greek debt to the IMF is a very good idea because the lending rate of the IMF is much higher than that of the ESM. Moreover, the ESM loans have a greater maturation period than those of the IMF. The Bruegel made this proposal in January 2015.

4. There is disagreement between the European institutions and the IMF on the need to establish a mechanism for contingency measures if the measures of 5.4 billion euros linked to the programme do not lead to primary surpluses in 2018. Do you consider it necessary to legislate for this contingency mechanism?

Gros: Contingency measures should not be needed. If the Greek economy does not recover after implementing the 5.4-billion-euros in measures due to a negative shock then the contingency measures will be necessary in theory but impossible to implement from a practical and political point of view. I think the key question is whether, with all these uncertainties, the Greek economy will truly recover, making the contingency measures unnecessary.

Darvas: Perhaps the reason is that the Eurozone finance ministers have little confidence that Greece will implement the measures agreed. However, I do not remember a similar condition in other bailout programmes and I disagree with this practice. I consider that the measures agreed should be implemented. If the fiscal deficit proves higher, due to a weaker-than-expected economic growth, then additional austerity will be a huge mistake.

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