The stage is set for this week’s crucial Eurogroup meeting in Brussels and a first “showdown” between European institutions and the IMF over the issue of Greek debt relief, with the matter obviously exceeding whatever conditions and prospects for the recession-plagued country and serving as a possible precedent for other countries’ foreign debt considerations.
According to reports and numerous press reports over the recent period, the D.C.-based Fund wants extended payment periods for loan repayments, extended grace periods and lower interest rates on current loans, otherwise, it has warned that Greece’s external debt could skyrocket to 300 percent of GDP in the year 2060.
The Fund estimates that proceeds from privatizations in the east Mediterranean country will reach a very modest five billion euros until 2030, while also warning of a risk for another bank recapitalization due to the Olympus-sized mountain of non-performing loans in the country held by domestic lenders.
A previous report by the IMF said the Greek debt’s sustainability depends on keeping the country's financing needs at extremely low levels for an extended period of time, thus allowing the debt level to decrease significantly before the country tries to return to the markets for the funding needs.
Nevertheless, the IMF’s plan, as presented by “N”, is expected to meet with opposition by practically all Eurozone member-states (except Greece, of course).
The plan’s details include:
n An increase in the grace period of EFSF loans (130.9 billion euros) by 17 years
n An increase in the grace period of EZ loans (52.9 billion euros) by 20 years
n An increase in the grace period of ESM loans (21.4 billion euros) by six years
n Deferment of interest payment for 17 years on EFSF loans
n Deferment of interest payment for 17 years to 24 years on EZ-EFSF loans
n Extension of the maturity period for bilateral loans by 40 years, from 2040 to 2080
n Maturity of EFSF loans extended by 24 years, from 2056 to 2080
n A “freeze” interest rates at 1.5 percent until 2045
