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| I.M.F. Says Greece Needs Debt Relief, but Blames Government Lapses | |
| (35 minutes later) | |
| FRANKFURT — Greece will need more help from eurozone countries to manage its debt because the country’s finances and economic performance have deteriorated since a new government took office, the International Monetary Fund said in a report on Thursday that is likely to further heighten tensions between Athens and its creditors. | FRANKFURT — Greece will need more help from eurozone countries to manage its debt because the country’s finances and economic performance have deteriorated since a new government took office, the International Monetary Fund said in a report on Thursday that is likely to further heighten tensions between Athens and its creditors. |
| The report, which assessed the prospects of Greece’s being able to repay its international creditors, amounted to an I.M.F. indictment of the way Prime Minister Alexis Tsipras has managed the country since taking office in January, though it did not mention him or his Syriza party by name. | The report, which assessed the prospects of Greece’s being able to repay its international creditors, amounted to an I.M.F. indictment of the way Prime Minister Alexis Tsipras has managed the country since taking office in January, though it did not mention him or his Syriza party by name. |
| Whether intended to or not, the report, coming shortly before a national referendum on Sunday in Greece over whether to accept a debt-relief package opposed by the Tsipras government, has strong geopolitical dimensions. The tone of the report may feed perceptions that the I.M.F. and eurozone leaders are no longer willing to negotiate with Mr. Tsipras and are hoping a yes vote in the referendum will prompt his government to resign. | Whether intended to or not, the report, coming shortly before a national referendum on Sunday in Greece over whether to accept a debt-relief package opposed by the Tsipras government, has strong geopolitical dimensions. The tone of the report may feed perceptions that the I.M.F. and eurozone leaders are no longer willing to negotiate with Mr. Tsipras and are hoping a yes vote in the referendum will prompt his government to resign. |
| Before January, when the new government was elected, the I.M.F. said, Greece’s economy had reached a point where Athens would have been able to make debt payments in years to come. But in recent months, the government has weakened efforts to improve the economy, and has slowed the sell-off of government assets that would have raised cash, the I.M.F. said. And that has created a new financing gap, the fund’s report said. | Before January, when the new government was elected, the I.M.F. said, Greece’s economy had reached a point where Athens would have been able to make debt payments in years to come. But in recent months, the government has weakened efforts to improve the economy, and has slowed the sell-off of government assets that would have raised cash, the I.M.F. said. And that has created a new financing gap, the fund’s report said. |
| “Coming on top of the very high existing debt, these new financing needs render the debt dynamics unsustainable,” the I.M.F. said in the report. “If the program had been implemented as assumed, no further debt relief would have been needed.” | “Coming on top of the very high existing debt, these new financing needs render the debt dynamics unsustainable,” the I.M.F. said in the report. “If the program had been implemented as assumed, no further debt relief would have been needed.” |
| The program refers to the international bailout package that a previous Greek government agreed to in 2012, which called for strict economic measures that the Tsipras administration came to power opposing. | The program refers to the international bailout package that a previous Greek government agreed to in 2012, which called for strict economic measures that the Tsipras administration came to power opposing. |
| Greece needs an additional 50 billion euros, or $56 billion, in debt relief, the I.M.F. calculated, of which €36 billion would come from other eurozone countries. | Greece needs an additional 50 billion euros, or $56 billion, in debt relief, the I.M.F. calculated, of which €36 billion would come from other eurozone countries. |
| But even those sums are probably understated because the report was prepared before the situation in Greece deteriorated even more this week. The government closed Greek banks on Monday to stanch an outflow of deposits, and on Tuesday, it missed a €1.6 billion loan payment that was due to the I.M.F. Analysts say the country is effectively bankrupt. | But even those sums are probably understated because the report was prepared before the situation in Greece deteriorated even more this week. The government closed Greek banks on Monday to stanch an outflow of deposits, and on Tuesday, it missed a €1.6 billion loan payment that was due to the I.M.F. Analysts say the country is effectively bankrupt. |
| At the very least, the I.M.F. said, Greece will need to delay repayment of much of its debt. More likely, its creditors will need to write off some of the debt and absorb losses. | At the very least, the I.M.F. said, Greece will need to delay repayment of much of its debt. More likely, its creditors will need to write off some of the debt and absorb losses. |
| That word is likely to be received very poorly in the other eurozone countries that hold most of Greece’s debt. The cost of further debt relief will be borne mostly by taxpayers in countries like Germany where resentment of Greek behavior is already high. | That word is likely to be received very poorly in the other eurozone countries that hold most of Greece’s debt. The cost of further debt relief will be borne mostly by taxpayers in countries like Germany where resentment of Greek behavior is already high. |
| “Creditors want a change in government in Athens,’’ analysts at Eurasia Group, a consultancy, said in a note to clients on Thursday. “And they see this Sunday’s referendum as their first possibility to achieve it.” | “Creditors want a change in government in Athens,’’ analysts at Eurasia Group, a consultancy, said in a note to clients on Thursday. “And they see this Sunday’s referendum as their first possibility to achieve it.” |
| Many economists regarded Greece’s debt as having been unsustainable even before Syriza took office. But the I.M.F. report argues that the debt load was on its way to becoming manageable because of low interest rates and an improving economy. | Many economists regarded Greece’s debt as having been unsustainable even before Syriza took office. But the I.M.F. report argues that the debt load was on its way to becoming manageable because of low interest rates and an improving economy. |
| The progress was squandered by government policies in recent months, the I.M.F. report implied, because the government has failed to implement a program intended to improve the functioning of the economy. Among other things, the program requires Greece to abolish rules that limit competition among professions such as accountancy and law and lead to higher fees for businesses and individuals. | The progress was squandered by government policies in recent months, the I.M.F. report implied, because the government has failed to implement a program intended to improve the functioning of the economy. Among other things, the program requires Greece to abolish rules that limit competition among professions such as accountancy and law and lead to higher fees for businesses and individuals. |
| Plans to sell government assets, already behind schedule when Syriza took office, are even more in jeopardy, the I.M.F. said. Revenue from sales of state assets amounted to just €3.2 billion as of the end of March, the I.M.F. said, far short of a target of €50 billion by the end of the year. | Plans to sell government assets, already behind schedule when Syriza took office, are even more in jeopardy, the I.M.F. said. Revenue from sales of state assets amounted to just €3.2 billion as of the end of March, the I.M.F. said, far short of a target of €50 billion by the end of the year. |
| The new government has placed further conditions on privatizations that will make it even more difficult to sell assets such as airports or real estate. And one of the main categories of assets — stakes in the country’s largest banks — has become nearly worthless because of questions about whether the banks can survive. | The new government has placed further conditions on privatizations that will make it even more difficult to sell assets such as airports or real estate. And one of the main categories of assets — stakes in the country’s largest banks — has become nearly worthless because of questions about whether the banks can survive. |
| “Under these circumstances,” the I.M.F. said, “it is not reasonable to assume revenues from bank sales.” | “Under these circumstances,” the I.M.F. said, “it is not reasonable to assume revenues from bank sales.” |