WASHINGTON - The International Monetary Fund estimated on Friday that Greece faced a financing gap of between 5.5 billion and 9.5 billion euros (4.6 billion and 8 billion pounds) for 2015 and 2016 and said it had assurances from Europe it would deliver the aid in the final years of the bailout.
It was the first time the IMF had estimated a range of possible financing needs for Greece’s international bailout program beyond 2014. The European Commission said in December the money needed for Greece over the two-year period encompassing 2015 and 2016 would amount to 5.6 billion euros. Greece, the epicentre of the European debt crisis, has received tens of billions of euros in emergency loans from its euro zone partners and the IMF since mid-2010 to stave off bankruptcy. Its economy is likely to shrink for the sixth consecutive year in 2013.
Tensions between the IMF and Europe flared in November over how to reduce Greece’s large debt load, which threatened to delay the next aid tranche to Greece in a year where the program had already suffered setbacks from elections and lack of reform.
Questions also arose over whether Europe would continue to support Greece financially without further reforms, prompting concerns that Athens would need to exit the euro zone.
IMF mission chief for Greece Poul Thomsen told reporters that Europe had promised it would continue to support Greece. Funding estimates were “subject to a lot of uncertainty” and would be reassessed regularly, he added.
Under IMF rules, loan programs need to be fully financed for a 12-month period or the IMF withholds loan disbursements. Thomsen said the Greek program was fully financed “well into 2014,” although it was too early to say whether the additional funding for Athens would be needed at the start of 2015 or towards the end of 2014.
“The undertaking of the European partners to fill the gap, whatever that gap will be in 2015-2016, is entirely in line with our policy even if they are not concrete about it,” Thomsen told a conference call with reporters. “What is key is that the Europeans know there is a gap and whatever the gap is, they will have to fill it.”
The IMF board agreed on Wednesday to pay the next aid tranche of 3.24 billion euros to Greece under the 240 billion-euro international bailout involving a troika of lenders including the IMF, European Union and European Central Bank. Brazil, which has long expressed concern over the IMF’s large financial exposure to Greece, opposed the decision, arguing that the prospect of Greece regaining market access in the medium term was “highly doubtful.”
“It is unclear whether the current program provides reasonably strong prospects of success,” Paulo Nogueira Batista, IMF executive director for Brazil and 10 other countries in Latin America and Asia, said in a statement to the board.
IMF staff also questioned in documents released on Friday whether Greece would be able to repay the IMF if its program “went irretrievably off track” and Europe halted support for Athens. Euro zone governments agreed last year on a debt buyback program for Greece among a series of steps to cover the debt-strapped country’s financing needs. Thomsen said Europe had not said exactly how it would provide additional debt relief, but options included reducing interest rates on Greek loans.
“The key is that Europe has recognized for the first time that debt is not sustainable without direct transfers in one form or another from Europe to Greece and that there is a commitment to do that,” he added.
Thomsen said confidence was returning to Greece and there was renewed interest from investors in the country, although he cautioned that the country still faced immense challenges.
“There is clearly an improvement in confidence compared to where we were in the middle of last year,” he said. He said the new Greek government was determined to crack down on tax evaders and to boost tax revenues, although there had been no significant impact on tax collections so far.