An International Monetary Fund study published on Tuesday showed that Greece needs far more debt relief than European governments have been willing to contemplate so far, as fractious parties in Athens prepared to vote on a sweeping austerity package demanded by their lenders. The IMF’s stark warning on Greece’s debt came as Prime Minister Alexis Tsipras struggled to persuade deeply unhappy leftist lawmakers to vote for a package of austerity measures and liberal economic reforms to secure a new bailout.
In an interview with state television, he said that although he did not believe in the deal, there was no alternative but to accept it to avoid economic chaos. The IMF study, first reported by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.
The Debt Sustainability Analysis is likely to sharpen fierce debate in Germany about whether to lend Greece more money. The debt analysis also raised questions over future IMF involvement in the bailout and will be seen by many in Greece as a vindication of the government’s plea for sweeping debt relief. A Greek newspaper called the report, which was initially leaked, a slap in the face for Berlin. Late on Tuesday, a senior IMF official, who spoke on condition of anonymity, said, “We have made it clear … we need a concrete and ambitious solution to the debt problem.