With the ink on a new loan deal not even dry, an official from one of Greece’s international lenders said that once again the country’s need for money has been underestimated and more assistance is needed because loans and austerity measures have failed to get a handle on runaway $430 billion in debt.
“There is a gap according to our preliminary projections for 2015-2016” of up to “9.5 billion euros ($12.6 billion,)” Poul Thomsen, the International Monetary Fund’s mission chief for Greece, told a conference call of journalists. “The IMF’s policy is that the program needs to be fully financed for the 12 months ahead … what is key is that the Europeans know there is a gap and they’ll have to fill it,” he said, according to the Bloomberg news agency.
He didn’t say if the lenders would provide the funds or, if so, they would insist again on more austerity measures. Prime Minister Antonis Samaras has vowed that he would not put any more punishing conditions on Greeks as social unrest has continued and more protests and strikes are looming.
The IMF has been pressing Europe to do more to resolve the Greek debt crisis, after the fund extended its Greek rescue loan to four years from three years and lowered the interest charged on it and agreed just recently to release another 34.4 billion euros ($45.7 billion) in rescue loans as part of a second bailout of $173 billion. A first bailout of $152 billion initiated in 2010 has been expended but attached pay cuts, tax hikes and slashed pensions have backfired, creating record unemployment of 26.8 percent and driving down expected revenues.
Despite the two bailouts from the Troika of the European Union-IMF-European Central Bank as well as a private-sector debt cut, Greece is set to enter its sixth year of recession in 2013, pushing its debt mountain to 190 percent of output in 2014. The IMF earlier in the week unblocked a frozen 3.4 billion euros ($4.3 billion) installment after the government last month pushed through Parliament a $17.45 billion spending cut and tax hike plan.
Thomsen said that, “We only went ahead because we got assurances from the Europeans that they would provide the money,” for Greece’s future needs, before the country can return to the markets for financing, which IMF chief Christine Lagarde said she hopes can happen before 2016.
Thomsen said the IMF did not think it was “realistic” that Greece would return to borrowing markets before the end of 2014. “We have a need for more money from the official sector. And there is a commitment to provide that. The Eurozone has said ‘We will do so if there is no return to markets,'” Thomsen said.
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