IMF says Greece can cope with debt but could sell property

12th May 2011, Comments 0 comments

The IMF said on Thursday its analysis did not point to Greece having to restructure its debt, noting the country had assets worth several hundred billion euros which it could sell.

Greece is being supported by an IMF/European Union (EU) 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.

The International Monetary Fund's director for Europe, Antonio Borges, told a press conference hosted by the European Central Bank that the latest review of the aid programme in February concluded that Greece's debt was sustainable.

It "therefore does not require restructuring," he added.

Financial markets and economists are questioning whether Greece will be able to pay back its debts on time however, or whether it might have to extend the repayment period or reimburse less than the full amount owed.

Despite a huge effort in 2010 -- when hundreds of thousands of Greeks saw their wages and pensions trimmed and many lost their jobs -- the country failed to meet its deficit reduction goals as the economy shrank faster than expected.

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

The next IMF review of Greek aid is due in June but "at this point, on the basis of our programme we think that Greece should be moving in the right direction to a position where its debt is sustainable," Borges said.

Analysts at Barclays Capital disagreed however, 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."

On Wednesday, the EU economic affairs chief warned that restructuring Greece's massive debt would have devastating consequences for the country and the eurozone as a whole.

European Economy Commissioner Olli Rehn said that a "large part" of the Greek banking system would likely "become insolvent" if the national debt were restructured.

In Germany, where opposition to more financial aid for indebted eurozone partners is strong, Finance Minister Wolfgang Schaeuble stressed on 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 said during an address to parliament.

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

He said such a move would "be most welcome."

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

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

Athens had already committed itself to a programme of privatisations worth about 50 billion euros, Borges noted, but 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 policies had prevented debt troubles in Greece, Ireland and Portugal from spreading across 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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