LatAM fury as the International Monetary Fund continues support for Greece
Brazil expresses Latin America’s fury as IMF continues to support Greece
Brazil has angrily attacked last week’s £1.6bn International Monetary Fund payment to Greece on the same day as a report from the fund identified a new £9.6bn black hole in Greek finances.
Bruno Waterfield By Bruno Waterfield, in Brussels4:57PM BST 31 Jul 2013CommentsComments
Paulo Nogueira Batista, who represents Brazil and 10 other central and South American countries on the IMF board, described the latest official assessment of Greek debt repayment prospects as confirming his “worst fears”.
“Neverending economic depression and severe unemployment levels have led to political discord. Implementation has been unsatisfactory in almost all areas; growth and debt sustainability assumptions continue to be over-optimistic,” Mr Batista said in a unusually frank statement that has laid bare the deep IMF divisions over Greece.
“The widespread perception that the hardship brought on by draconian adjustment policies is not paying off in any way has further undermined public support for the adjustment and reform programme.”
The comments on Wednesday came as the IMF warned of a €4.4bn “financing gap” in Greece next year and €6.5bn in 2015, as well as making a request to the eurozone to find additional debt relief for the country worth some €7.4bn next year.
As well as the funding shortfalls, implying a major re-negotiation of the Greek bailout before next summer, the IMF is concerned over Greece’s ability to pay its debts, including €28.4bn in loans from the fund.
“Risks are high, and mainly associated with slippages in structural reforms, balance sheet vulnerabilities, and potential for political instability,” an IMF report warned.
“The risk of political instability remains acute, especially in light of high unemployment and on-going social hardship. Further ambitious fiscal adjustment is needed for public sector debt to decline steadily, which exacerbates the possibility of social stress and political resistance.”
Brazil and other developing countries are growing increasingly angry over their liabilities for some of the largest loans in the IMF’s history, which are being used to prop up the eurozone and the EU single currency.
As well as warning of a high risk of Greece going “off-track”, the IMF said that if eurozone countries did not write down more Greek debt, a move opposed by Germany, the Mediterranean country’s “capacity to repay the fund would likely be insufficient”.
Mr Batista described the report as “one step short of openly contemplating the possibility of a default or payment delays by Greece on its liabilities to the IMF”.
The abstention by the 11 Latin American states from the IMF decision to continue support for Greece underlines growing concerns over the Greek government’s ability to pay its debts unless the eurozone accepts huge losses on loans.
The eurozone is formally committed to debt relief once Greece achieves primary budget surplus, probably at the end of this year, but Angela Merkel, the German Chancellor, has rejected further “haircuts” on the amount it must pay back.
“European partners should consider providing relief that would entail a faster reduction in debt than currently programmed,” the IMF report said