EUROPEAN AUTHORITIES have publicly admitted for the first time that Greece may need to restructure its debt. The country’s difficulties are also believed to have intensified with uncertainty at the IMF arising from the arrest of its chief, Dominique Strauss-Kahn.
Reuters reports that Luxembourg’s Jean-Claude Juncker, chair of the eurozone finance ministers’ group, said he remains “strongly opposed to a large restructuring of Greek debt”, although a soft restructuring could be considered if Greek’s makes further efforts to tackle its deficit.
Following the two-day meeting of eurozone finance ministers, EU Commissioner Olli Rehn said yesterday that “a voluntary expansion of loan maturities” may be considered – suggesting Greece’s private creditors may be asked to give the country more time to repay its debts.
The chief of the IMF’s mission to Greece, Pol Thomsen, said that the country’s deficit reduction targets would not be met without greater reforms, Reuters reports.
Greece is expected to announce new spending cuts and reforms in the coming days, before such a move will be considered. The country is expected to post a budget deficit of 9.5 per cent this year and its debt is expected to reach 166 per cent of economic output by the end of next year.
Yesterday the New York Times reported that because some 90 per cent of Greek bonds are covered by Greek laws, the country has “more latitude to deal with the crisis” and can allow the government to restructure its debt without the consent of bondholders.
Impact of IMF scandal
Mohamed El-Erian, CEO of Pacific Investment Management, told the Washington Post that the IMF controversy couldn’t come at a worse time, given the organisation’s influence on global economies.
This Euronews report says that some Greeks believe they have lost a valuable ally in Strauss-Kahn:
- Additional reporting by the AP
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