IMF says Greece can cope with debt but could sell assets

12th May 2011, Comments 0 comments

The International Monetary Fund said Thursday its analysis did not point to Greece having to restructure its debt, noting that Athens had hundreds of billion of euros in assets it could sell.

Greece is being supported by an IMF/European Union rescue package worth 110 billion euros ($155 billion), but there is a widespread belief on financial markets that it will need another 60 billion euros over the next two years.

IMF director for Europe Antonio Borges told a press conference hosted by the European Central Bank that the aid programme's last review in February determined that Greece's debt was sustainable.

"In those circumstances there is no need for any debt restructuring," he said.

Financial markets and economists are questioning whether Greece might have to extend repayment periods or reimburse less than the full amounts it owes.

Despite a huge effort last year, the country failed to meet deficit reduction goals as the economy shrank faster than expected.

In Athens, Greek officials urged calm on Thursday after a dozen people were hurt during protests over tough austerity measures to deal with the crisis.

Wednesday's clashes occured as Greece came in for a critical audit of its books by experts from the EU, IMF and ECB.

The next appraisal of Greek aid is to be released in June but "at this point, on the basis of our programme we think that Greece should be moving in the right direction," Borges said.

Analysts at Barclays Capital disagreed, saying in a research note: "As a result of weak growth and sizeable fiscal slippages, Greece has reached the point where, under realistic scenarios, debt dynamics are unsustainable.

"The countdown to restructuring has started, in our view."

RBS economist Jacques Cailloux added: "Markets appear ever less inclined to accept political reassurances and instead take their cue from leaks on debt restructuring."

On Wednesday, EU economic affairs commissioner Olli Rehn acknowledged that a "large part" of the Greek banking system could "become insolvent" if the public debt were restructured.

In Germany, where opposition to more financial aid for indebted eurozone partners is strong, Finance Minister Wolfgang Schaeuble stressed Thursday that Athens would have to respect a strict agenda in exchange for further help.

"We will not be able to agree to further measures without clear conditions," he told lawmakers in parliament.

IMF director Borges noted meanwhile that the Greek government held hundreds of billions of euros in real-estate and "other very valuable assets," and said some should be sold to "provide an additional element of credibility to the Greek situation."

Borges said "the government has an extraordinary portfolio of assets" and that the gradual sale of some, including holdings in listed companies, would "be most welcome."

An agency which owned the state's real-estate assets had by itself a balance sheet of "about 280 billion euros," the IMF official said.

The latest EU estimate of Greece's debt put it at around 329 billion euros.

Athens had already committed itself to a programme of privatisations worth about 50 billion euros, Borges noted, before adding that "is probably less than 20 percent of all the assets that the Greeks could privatise."

In its latest economic outlook for Europe, the IMF said that while urgent EU measures had kept debt woes in Greece, Ireland and Portugal from overwhelming the eurozone so far, "contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk."

© 2011 AFP

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