The IMF is open to delaying Greece's repayment of its international loans but believes tough decisions need to be taken by Europe before it will release another tranche of loan funds, a senior IMF official said today.
A senior Greek official also said the government expected parliament to vote by the end of June on its medium-term austerity plan, a condition for the new international package as Athens struggles to avoid defaulting on its debt.
A team from the IMF, EU and European Central Bank reached an agreement last Friday, under which Athens would impose more austerity and faster privatisation to cut its budget deficit.
But Bob Traa, the IMF's senior representative in Greece, said the European Union needed to do more work before the fund's board could release more loans.
"I believe there is a summit in Europe, in June, where some hard nuts need to be cracked. They need to make some decisions, and then we will go to our board and disburse in early July," he told a banking conference in Athens.
EU officials are struggling to find a solution for Greece's financing needs for the next few years which avoids triggering a default but pushes some of the burden onto the private sector.
"What needs to be decided is how to fill the various parts of the financing. This is not something that we can do as a team," Mr Traa said.
Greece agreed a €110 billion rescue with the EU and IMF a year ago. But this assumed Athens could resume borrowing commercially in early 2012, which is now inconceivable as yields on Greek debt are sky high in the secondary market.
Details of the new deal to supersede the May, 2010 rescue have yet to be hammered out, but it assumes Greece's funding needs will be covered by a mix of new EU and IMF loans, budget deficit cuts including tax increases and state asset sales, and a "voluntary" participation by private creditors.
One possibility is that creditors would agree to buy new Greek bonds when old ones they hold mature, meaning that Athens would not have to produce the cash up front.
The managing director of ratings agency Moody's sovereign risk group said today it was hard to see how a private sector rollover of Greek debt would be truly voluntary and it would therefore likely constitute a default.
"It's hard to imagine in the current circumstances that people would voluntarily do this," Bart Oosterveld told reporters in Paris. "Our default definition contemplates that for something to be voluntary it has to be truly voluntary ... More likely than not this would be a credit event in our view."
Greece has already won an extension of the time it has to repay EU loans. The IMF has said it was also open to a similar move but first needed an agreement with Brussels.
Greek sovereign debt totals €340 billion or about 150 per cent of GDP and Mr Traa said the government needed to move fast on its problems. "Greece is at a critical juncture and has no time to waste, now is not the time to slow down," he said.
It is unclear whether private sector banks would sign up to such a deal, how much they would be prepared to contribute and whether ratings agencies would look on such a move as a default.
Germany's BDB banking association said private creditors should only be involved as a last resort and that that point had not been reached yet.
Dissenters within Greek prime minister George Papandreou's ruling Pasok party have demanded that each part of the plan, which includes €6.4 billion in new austerity steps this year and accelerated sales of state assets to cut the budget deficit, be handled in separate votes.
Voting on the plan as a single package would prevent the doubters from rejecting individual measures such as tax increases or sales of state assets.
The EU has called on all leading Greek parties to forge a consensus on the medium plan, which covers a period beyond the next scheduled elections in 2013.
Two senior government officials also said the government was not planning any referendum on austerity, even though Mr Papandreou said yesterday that he was open to studying legislation allowing such votes. Greece already has such an article in the constitution, and it was not clear whether he was referring to this, or the possibility of amended or new legislation.
Reuters
