IMF warns on need for write-off of Greece’s debt

According to FT article, the IMF is pushing for a write off of Greece’s sovereign debt warning that it might hold back its portion of the pending EUR7.2bn tranche unless Greece’s debt is brought back on a sustainable path. 

The warning was delivered to the Eurozone Finance Ministers by Poul Thomsen, the head of the IMF’s European division, who suggested that Greece is on track to run a primary deficit of as much as 1.5% (instead of a 3% surplus envisaged in the MoU). 

Assuming this forecast is correct, it points to the requirement for new measures worth cEUR5bn in order to achieve a more realistic 1.5% primary surplus, something that would certainly meet the resistance of the Greek govt. 

Alternatively, debt sustainability could be restored through a debt write-off, but this would also be politically challenging from the EU’s perspective. The Greek debt issue was most likely the main item on the agenda at yesterday’s telecommunication between the Greek PM and the IMF Managing Director.