IMF Managing Director Christine Lagarde explained the Fund’s “balancing act” on Thursday in agreeing to a conditional 1.6-billion-euro “precautionary stand-by arrangement” for bailout-dependent Greece, saying the program emphasizes implementation of deep reforms by Athens and room for European creditors to extend debt relief.
“…(the program) provides both breathing space to mobilize support for the deeper structural reforms that Greece needs to prosper within the euro area and a framework for Greece’s European partners to deliver further debt relief to restore Greece’s debt sustainability,” Lagarde said after an IMF executive board meeting.
The Fund has stuck to its position that the current Greek debt load is unsustainable without relief measures, and had declined to finance the bailout after 2015. However, last month the Fund softened its stance and agreed to extend conditional support heading towards the end of the program in August 2018.
On her part, Delia Velculescu, the IMF mission chief for Greece, clarified that there was no deadline for European lenders extend debt relief in the period before the program ends – echoing the stricter view held by Berlin and other creditors, namely, that no need for debt relief is needed in the coming period.
Velculescu said an overall central government debt ceiling was contingent on the country meeting a primary budget surplus target of 2.2 percent of GDP in 2018, a fiscal goal that will jump to an ambitious 3.5 percent in 2019.
