Public debt of Greece is unsustainable

The International Monetary Fund updated and published online its controversial analysis of debt sustainability of Greece. Accoridng to the analyse the public debt of Greece is unsustainable in the greater degree. This assessment could significantly complicate the disputes over the new utility for Greece because the IMF can participate according to their own regulations in a rescue package only if it considers that the debt is sustainable. Obviously in the case of Greece, this is no longer true.

On the other hand Germany has traditionally stressed that it is ready to provide new aid to Athens only with the participation of the IMF. To participate in the plan to rescue Greece, now apparently wants the fund “haircut” – remission of part of the debt – something that Europe has so far refused to do. Federal Chancellor Angela Merkel has repeatedly said that “classic Haircut”, i.e. forgiveness of part of the debt can not even comment.

The debt of Greece may now become bearable only through facilitation measures that go far beyond what Europe has been taken into account, consider IMF. The sharp deterioration of debt sustainability point to the need to alleviate the debt burden on a scale much larger than what is being discussed so far and suggested by the European Stability Mechanism, the IMF stated. European countries will have to give Greece 30-year grace period in servicing all its obligations to the European partners, including new loans and a very large extension of maturities. Otherwise they will have to make annual transfers to the Greek budget or take large advance cut on their loans to Athens, says the report.

The updated analysis of the sustainability of Greek debt was sent to the governments of the euro zone countries late last night, just hours after Athens and its 18 partners in the Eurozone reached an agreement in principle to start negotiations on a third utility value to 86 billion. Euro against the introduction of austerity measures and structural reforms.