Wednesday, August 9, 2017

Minister’s court win intensifies fears for rule of law in Greece

by Kerin Hope

Financial Times

August 9, 2017

Fears for the independence of the Greek judicial system are mounting after the foreign minister won a court order freezing the bank accounts of a leading magazine over a reader’s letter describing him as a former “fanatical” Stalinist.

The ruling in favour of Nikos Kotzias has drawn sharp criticism from academics and public figures, who say it violates EU law on freedom of expression. It also highlights broader concern over perceived interference in the justice system by the leftwing Syriza government.

The concerns widened beyond Greece last week when senior eurozone officials warned the government that the continued prosecution of Andreas Georgiou, its former statistics chief, over claims he inflated the size of the country’s budget deficit in 2009, threatened to drive a wedge between Athens and its euro area creditors.

The affair comes as Brussels is already locked in stand-offs with Poland and Hungary over the rule of law that have raised questions over the EU’s ability to enforce the democratic standards at the core of the European project.

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Monday, August 7, 2017

Lessons for the eurozone from Greece’s painful crisis years

by George Pagoulatos

Financial Times

August 7, 2017

Greece is finally growing again. But it has been arguably the eurozone’s greatest failure. Catapulted into a debt crisis with a 15 per cent government spending deficit in 2009, the country suffered eight years of economic contraction. Unemployment is still 23 per cent, youth unemployment 45 per cent. Greece’s “Great Depression” has been as deep as that of the US in the early 1930s, but twice as long.

Can Europe learn from the country’s painful experience? A first lesson is to reform at the top of the cycle. Greece had to adjust in recession because it failed to do so in its pre-crisis boom. Reforms should always be adopted in times of growth, when people are confident and losers can be compensated. An upswing can buy time to implement reforms, but should not be invoked as evidence that reforms are unnecessary. The eurozone is now in its strongest period of post-crisis recovery. But it should avoid complacency. Reforms are necessary for the long-term viability of the monetary union. We need a stabilisation budget and joint-borrowing capacity; greater risk sharing; and financial union to break the doom loop between banks and government.

After September’s election in Germany, and assuming Emmanuel Macron delivers domestic reforms in France, Europe will be at the top of its political cycle. This is the time to push ahead with eurozone reforms. They will require painful concessions: the Germans refuse joint deposit insurance or a fiscal backstop, the French are not keen to surrender control over the national budget and the Italians reject ceilings on bank exposure to sovereign debt. But something must give.

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Elstat suspends preliminary Greek GDP estimate after discrepancies

by Kerin Hope & Eleftheria Kourtali

Financial Times

August 7, 2017

Greece’s statistical agency will no longer public “flash” estimates of the country’s gross domestic product after delays in data collection have led to frequent revisions of official growth figures.

Elstat said on Monday that its second quarter GDP estimate for 2017, which was due to be announced on August 14, would not be made public. Instead it said the provisional estimate, which is calculated using a bigger range of inputs from the economy, would be published on September 1 as scheduled.

The agency said it decided to suspend the flash estimate “in order to explore the availability of the necessary data sources that would help improve the consistency of the flash estimate.”

An Elstat official said some data used to calculate the flash estimate was incomplete, making revisions necessary when updated figures arrived.

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Sunday, August 6, 2017

A legal farce calls Greek reform into question

Financial Times
Editorial
August 6, 2017


After years of punishing austerity, Greece finally has grounds to hope it will regain its financial independence when its bailout programme ends next summer. The economy has returned to modest growth. Against expectations, Athens has hit its fiscal targets and secured a pledge of further debt relief from creditors. Yet despite the huge efforts made to put the public finances on a more sustainable trajectory, there remain serious doubts over the government’s commitment to reform the Greek state, rid institutions of political influence and guarantee the rule of law.

The conviction last week of Andreas Georgiou, the country’s former chief statistician, for “violating” his duties during the sovereign debt crisis, is especially worrying. Mr Georgiou has for six years been fighting accusations that, as head of Elstat, the statistical agency, he inflated Greece’s 2009 budget deficit, forcing the country to undergo deeper austerity.

No matter that he had been acquitted of these charges a few months earlier, only to have the case reopened. No matter that the EU’s statisticians — whose standards he was supposed to be following — have endorsed both the procedures he followed and the figures he produced, describing last week’s trial as a “preset farce”. Mr Georgiou — a former IMF official and thus part of a hated international technocracy — is a convenient scapegoat for the failures of Greece’s political class.

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Friday, August 4, 2017

Greece scapegoats a statistician who only did his job

Washington Post
Editorial
August 4, 2017


In Greece, the lucrative tourism industry is threatened this summer by millions of oversized jellyfish washing ashore on the nation’s beaches. An even slimier development is the ongoing persecution of the country’s first independent chief statistician, whose tough-minded steps to straighten out Greece’s notoriously fraudulent economic data have been repaid with farcical prosecutions by a judicial system rapidly discrediting itself in the world’s eyes.

Andreas Georgiou, an American-trained economist who spent two decades working at the International Monetary Fund, was hired as Greece’s top statistician in 2010 as the country’s debt crisis was spiraling out of control. His goal was to honestly report economic data that for years had been fudged by politicians and officials seeking to minimize their own fateful fiscal mismanagement.

Having done just that, by applying reporting standards widely accepted across Europe, he is now scapegoated as the cause of the painful austerity program imposed on Greece by the IMF and European Union. Four times in recent years, an array of criminal accusations against Mr. Georgiou have been dismissed by prosecutors, only to be revived by judicial authorities amid fury by politicians and media outlets. This month, an Athens appeals court gave Mr. Georgiou a two-year suspended sentence — essentially for reporting accurate information to European authorities during the debt crisis.

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Thursday, August 3, 2017

By convicting an honest statistician, Greece condemns itself

by Megan Greene

Politico

August 3, 2017

Greek economic data is completely unreliable. That’s what I told Andreas Georgiou — as politely as I could — shortly after he had been put in charge of the Greek statistics agency in 2010.

He must not have been surprised at my answer. After all, that was exactly the problem he had been hired to fix by ensuring that the agency broke free of political influence.

And fix it he did, injecting the agency with a stiff dose of independence and markedly improving the data it produced.

His reward? Prosecution and, ultimately, conviction.

On Tuesday, Georgiou was handed a two-year suspended sentence for “breach of duty” during his stint at the head of the statistics agency, Elstat — a travesty that goes beyond the unfair treatment of one statistician to questions about the progress of Greece’s economic recovery and the sustainability of the eurozone.

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Wednesday, August 2, 2017

Eurozone officials in warning on Greece statistics trial ‘farce’

by Jim Brunsden, Arthur Beesley & Kerin Hope

Financial Times

August 2, 2017

Senior eurozone officials have warned that the continued prosecution in Greece of its former statistics chief is threatening to drive a wedge between Athens and its euro area creditors, only weeks after the country brokered a deal on the next stages of its €86bn bailout.

A suspended sentence handed down this week against Andreas Georgiou has prompted consternation among EU policymakers, reviving what many capitals fear is a series of politically motivated trials intended to restore the economic reputation of previous governments.

The long-running affair is likely to be put on the agenda of eurozone finance ministers in September amid “concern about the conviction across institutions”, said a diplomat. The judicial proceedings centre on Mr Georgiou’s time in charge of Elstat, the independent statistics agency set up as a condition of the first Greek bailout.

In remarks on Twitter that reflect deep unease in Brussels at Mr Georgiou’s conviction, Valdis Dombrovskis, European Commission vice-president, said he was following developments with concern. It was “important that [the] independence of Elstat and people who do their jobs are protected in line with the law”, said Mr Dombrovskis, who has responsibility for euro affairs.

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Tuesday, August 1, 2017

Former Greek data chief given suspended sentence

by Kerin Hope

Financial Times

August 1, 2017

An Athens appeal court has handed Greece’s former statistics a two-year suspended sentence for “violating” his duties during the country’s sovereign debt crisis.

The conviction of Andreas Georgiou came as a surprise as the former chairman of country’s statistical agency, Elstat, had been acquitted of the same charges by another appeals court only eight months ago. The case was reopened by Greece’s top prosecutor on grounds that a possible misjudgment had occurred.

Mr Georgiou is seen by many in Athens as the victim of a campaign to shift the blame for Greece’s financial mismanagement away from the New Democracy government who ran the country in the run-up to the debt crisis and which is blamed for borrowing recklessly on international markets.

The former statistics chief is accused of deliberately inflating the 2009 budget deficit figure from 13.6 per cent to 15.4 per cent of gross domestic product so that Greece would be forced to seek additional bailout aid and prolong harsh austerity policies required by the EU and International Monetary Fund, his former employer.

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Greek Court Finds Former Statistics Chief Guilty of Breaching Duties

by Marcus Walker

Wall Street Journal

August 1, 2017

A Greek court found the country’s former top statistician guilty of breaching his duties, ruling he should have sought approval before he told European Union authorities of the full extent of Greece’s budget deficit at the start of its debt crisis.

The Athens Appeals Court handed Andreas Georgiou, head of Greece’s official statistics agency in 2010-2015, a two-year suspended jail sentence on Monday for his handling in 2010 of the revision of Greece’s deficit data for previous years.

Mr. Georgiou denies any wrongdoing and has won widespread support from international statisticians, who say he is the victim of unjust persecution.

The EU has repeatedly certified that Mr. Georgiou reported Greece’s fiscal data accurately, in contrast with earlier Greek practices that EU bodies have said deliberately hid the scale of the country’s deficits.

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Monday, July 31, 2017

Greece’s former data chief ‘violated’ his duties, court told

by Kerin Hope

Financial Times

July 31, 2017

An appeals court prosecutor has called for Greece’s former statistics chief to be convicted for “violating” his duties during the period when the country was gripped by a worsening sovereign debt crisis.

Andreas Georgiou is accused of failing to hold the correct board meetings when he was chairman of Elstat, the Greek statistical agency, and of secretly endorsing austerity policies backed by the International Monetary Fund, his former employer.

“He neglected his duties by failing to hold the required monthly meeting of the board of directors . . . What did he want? To be the sole arbiter of Greek statistics and the star of the show?” prosecutor Lambros Patsavelis told a packed court in his summing up of the case against Mr Georgiou.

The former Elstat chief, who denies the charges, is facing his second trial over the affair after being acquitted in December by an appeals court. A senior Greek prosecutor ordered the case to be reopened with a different panel of judges, after examining documents from earlier hearings.

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Greece’s Road to Bailout Exit: 140 Reforms Down, Many More to Go

by Eleni Chrepa & Sotiris Nikas

Bloomberg

July 31, 2017

Greece’s hard times aren’t over.

A return to the bond market last week, the pledge of 8.5 billion euros ($9.5 billion) in new loans from euro-area creditors, the possibility of more money from the International Monetary Fund and a S&P Global Ratings outlook upgrade have coalesced to bolster investor sentiment that Greece has turned a corner.

Trouble is, much depends on the country implementing reforms -- dozens of the 140 measures agreed to are in various stages of application and more than 100 additional actions are needed to access the remaining 26.9 billion euros in funds before the current bailout program ends in August 2018.

While the evidence of belt-tightening is everywhere in Greece, from falling incomes to rising poverty, the country has less to show in terms of structural overhauls. Creditor demands for more measures threaten to become politically explosive as Greek citizens and businesses count the cost of the financial crisis that has thrown their lives into turmoil over the last seven years.

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Thursday, July 27, 2017

Crisis-Plagued Europe Sees a New Dawn After Greek Market Return

by Viktoria Dendrinou & Nikos Chrysoloras

Bloomberg

July 27, 2017

Five years after the sovereign debt crisis nearly tore the euro area apart, the currency bloc’s biggest problem child appears on the road to recovery as the region continues to tick off boxes underscoring its revival.

Greece sold 3 billion euros ($3.5 billion) of bonds this week for the first time since 2014, when the prospect of Alexis Tsipras’s election catapulted borrowing costs to unsustainable levels. The country’s return from the wilderness comes as a new French president has raised expectations about deeper economic integration following successive defeats of europhobic parties.

While there are still uncertainties clouding the euro area’s outlook, Greece’s rebound draws a line under a seven-year crisis, when the fight to preserve the currency union had become a daily routine.

“The euro zone’s recovery is real and political risk has receded,” said Manolis Galenianos, a professor of economics at the Royal Holloway, University of London. “This is not a facade.”

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Wednesday, July 26, 2017

Greece Still Hasn't Turned the Corner

Bloomberg
Editorial
July 26, 2017


Greece returned to the private debt market this week for the first time in years, raising 3 billion euros at a relatively affordable interest rate of 4.6 percent. That’s encouraging news -- but it doesn’t mean the euro zone’s most flattened economy is on course for sustained growth.

The economy is showing signs of life, growing a bit in the first quarter, and the government has gotten a tighter grip on the budget. But Greece’s long-term debt position is still dire, and its deeper structural reforms have barely begun. Greece hasn’t yet put its problems behind it.

Investors are apparently willing to take an optimistic view of their likelihood of getting repaid. The International Monetary Fund has helped fuel this optimism by approving “in principle” new assistance to Greece, which serves as a seal of approval for its policies and those of its euro-zone official creditors.

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Greek bond sale wins rare praise from Germany’s Schäuble

by Kerin Hope

Financial Times

July 26, 2017

Two years ago Wolfgang Schäuble said “it would be better” for Greece to leave the eurozone. But in rare praise this week Germany’s steely finance minister struck a much warmer note.

“Greece has carried out many reforms and is on a good path,” said Mr Schäuble in a media interview — support that shows how far the country has come since the EU’s tense five-month stand-off in 2015 with the leftwing government of Alexis Tsipras.

His comments came in the same week that Greece returned successfully to the sovereign debt market with a €3bn bond offering, which was more than twice subscribed. A buoyant Mr Tsipras hailed the issue as “the most significant step towards ending this unpleasant adventure of the memorandum [bailout].” Euclid Tsakalotos, the finance minister, said Greece would hold another two or three bond sales in the coming months with the aim of building a sufficient cash buffer to keep the government afloat after it exits an €86bn bailout in August next year.

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Tuesday, July 25, 2017

Greece stages a welcome return to capital markets

Financial Times
Editorial
July 25, 2017


It is precisely five years since Mario Draghi declared the European Central Bank ready “to do whatever it takes” to preserve the euro. With the eurozone’s recovery in full swing and the ECB starting to edge towards an exit from stimulus, there could be few better ways to mark the anniversary than a successful sovereign bond issue by Greece — the biggest casualty of the single currency area’s debt crisis.

The €3bn sale of a 5-year bond — of which about half came from existing investors who swapped their holdings of debt maturing in 2019 — is a tentative first step. It may say as much about investors’ desperate search for yield as it does about Greece’s rehabilitation with capital markets (a yield of 4.625 per cent on the new bond is less impressive than it seems, given the negative yield on German 5-year debt). Yet it is still a breakthrough to be celebrated.

The last time Athens was able to raise money on the open market was in 2014, shortly before the radical Syriza coalition arrived in government, throwing Greece’s bailout programme into disarray. Yet for all the turbulence, investors who bought those bonds — even as recently as February — stand to make a healthy profit.

Yesterday’s bond sale is a reflection of the progress Greece has made and a precondition of further progress.

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Greece Gets Solid Demand for First Bond Issuance in Three Years

by Nektaria Stamouli, Christopher Whittall & Emese Bartha

Wall Street Journal

July 25, 2017

Greece got solid demand Tuesday for its first bond issuance in three years, in what the government sees as the first of several moves that will enable the debt-ridden country to wean itself from new bailouts.

Tuesday’s deal included an invitation for holders of a bond coming due in 2019 to swap their securities for new ones due in 2022.

Greece sold €3 billion worth of the 2022 bond, Greek government officials and bankers said. About half of that is new money, and half is existing investors in the 2019 bond who switched, according to one of the banks managing the deal.

The new bond matures in August 2022 and will yield 4.625%. The 2019 bond is yielding around 3.2%, so investors will be paid a decent premium for participating in the swap.

Greek bonds have been on a tear of late. Greece paid €102.60 per €100 face value of the 2019 bond. A year ago, the bond was trading below €90.

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Greece Raises EU3 Billion in Bond Market Return After 3 Years

by Sotiris Nikas, Eleni Chrepa & Lyubov Pronina

Bloomberg

July 25, 2017

Greece raised 3 billion euros ($3.5 billion) in its first tapping of the bond market since 2014, with investors piling in on expectations the worst may be over for what was once the epicenter of Europe’s debt crisis.

Yield-hungry investors welcomed the new Greek paper, which carried a 4.625 percent yield. The sale by the sub-investment-grade rated country drew 6.5 billion euros in more than 200 offers, said a Greek government official, requesting anonymity because the information is not public. Greece’s last five-year bonds in April 2014 priced at 4.95 percent. Greece sold the new bonds along with a tender offer for the notes due 2019.

With the sale, the government of Prime Minister Alexis Tsipras is seeking to chalk out a path for an exit from the current bailout program, which ends in August 2018, while also capping the country’s financing needs in 2019 -- expected to be about 19 billion euros. Greece decided to test the markets after it failed to convince creditors to immediately reduce its debt burden and was left out of the European Central Bank’s bond-purchase program.

The outcome “was better than we expected,” Greek Finance Minister Euclid Tsakalotos said in comments broadcast live on state-run ERT TV. “This is not the end. There will be a second and a third” bond sale to ensure the country exits its bailout program in August 2018, he said.

“Tsipras left behind ‘collision economics’ a long time ago, and has apparently decided that the best strategy for re-election in 2019 is to exit the bailout program,” Nicholas Wall, manager at Old Mutual Global Investors, said in e-mailed comments.

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Monday, July 24, 2017

Greece Looks to Turn a Corner After Years of Economic Pain

by Liz Alderman

New York Times

July 24, 2017

Greece, long Europe’s economic problem child, is trying to prove that it has made progress in its recovery efforts by announcing plans to sell debt for the first time in years.

The proposed bond sale, the details of which were released on Monday, offered hope that Greece might at last be preparing to wean itself off the international bailouts totaling 326 billion euros, or about $380 billion, that it has relied on since 2010 to stay afloat.

The sale is a pivotal moment in the painfully fought efforts of Greece to recover from troubles stemming from the financial crisis that began on Wall Street nearly a decade ago and that at one point threatened to break up Europe’s currency union.

If investor interest is strong, it would be a landmark moment, not only for Greece but also for the eurozone, the 19 countries that use the euro. If Greece struggles to find buyers, however, the debt sale could represent yet another blow for a country that has only recently started to see signs of a turnaround after nearly veering out of the currency union just two summers ago.

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Greece names six banks for first bond issue since 2014

Financial Times
July 24, 2017

The Greek government has hired six banks to manage its return to the international bond markets after three years.

Goldman Sachs, Citi, Deutsche Bank, HSBC, BNP Paribas, and Bank of America Merrill Lynch will manage the deal to issue a five-year bond maturing in 2022 – Greece’s first since 2014. The new debt is due to launch tomorrow.

Greece’s left-wing Syriza government has eyed a return to the debt markets to underscore its economic rehabilitation after it was bought to the brink of a eurozone exit two years ago. The government has managed to secure its latest tranche of bailout cash and is looking to slowly build up its cash buffers ahead of the end of its current rescue programme in August 2018.

On Friday, S&P ratings upgraded its outlook on Greek government debt from stable to “positive” on the back of hopes the country will receive further debt relief from its EU creditors.

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Sunday, July 23, 2017

Greece on brink of return to sustainable growth, economists believe

by Tim Wallace

Daily Telegraph

July 23, 2017

Greece could be close to returning to sustainable economic growth at last after almost a decade of devastating recessions and crises, economists believe.

The country’s government is getting closer to restoring a degree of financial stability through the latest round of talks with the EU and the International Monetary Fund. After several false dawns, UBS’s chief economist for the region hopes that only a few more steps could be required to put the troubled economy firmly on the right track.

Gyorgy Kovacs believes that finalising the debt relief plan combined with Greece’s inclusion in the European Central Bank’s bond-buying programme would be one serious improvement, and that further improvements in economic sentiment, with the liberalisation of capital controls, is another.

“What we have seen is that, compared to the first quarter, there has been a positive turn in the economy. If we add on top of that the closure of the review, hopefully it will bring improved confidence into Greece,” he said.

“Hopefully it will allow the end of capital controls, or the easing of those.”

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Friday, July 21, 2017

To exit (to borrow from the markets) or not to exit: Greece’s new dilemma

by Theodore Pelagidis

Brookings Institution

July 21, 2017

Athens desperately needs to sell a 3 billion euro, five-year Greek government bond with a yield of around 4.5-4.7 percent as it strives to convince the markets—as well as domestic voters—that the economy is about to recover after eight years of depression and austerity. So, it is willing to pay much more than the 0.89-1.2 percent that the European Stability Mechanism (ESM) is currently charging as part of Greece’s bailout program. Indeed, on July 11, the ESM announced that 7.7 billion out of a total tranche of 8.5 billion euros would flow to the Greek state, of which 6.9 billion euros will cover loan maturities that expire this month. Then, on July 21, the board of the International Monetary Fund approved in principal a conditional loan worth as much as 1.6 billion euros for Greece—just the reassurance requested by many euro-area creditors. Yet Greece’s Gordian knot is far from untied and the most recent conditional acceptance by the fund regarding what amounts to a “precautionary stand-by arrangement” won’t translate to an immediate disbursement.

The urgent need for a “Grexit” to the global borrowing markets’ either amounts to a symbolic government effort to show investors that the economy is recovering or is something political. Despite recent optimism expressed about the likelihood of a Greed re-entry, its timing is far from guaranteed. According to the latest news, the European Commission, the European Central Bank and the IMF—also known as the troika—seem to have reacted by favoring a postponement of a bond issuance by Greece for the next few days, weeks, or even months. But questions remain, as the troika surely knew in advance about the Greek government’s intentions.

The IMF is insisting that Greece’s debt is hugely unsustainable, especially in the long-term. According to the fund, measures either taken or proposed so far by the Europeans, such as the 15-year interest deferral and maturity extension for some of the European Financial Stability Facility/ESM loans, won’t make the country’s debt burden sustainable. The IMF’s July 20 Debt Sustainability Analysis (DSA) just confirmed this view. Greece is not qualified by any standard to exit its program and re-enter the markets. Among other things, such a move would add new debt to the already colossal burden it currently carries, which is equivalent to around 180 percent of GDP. So, even if Greece successfully borrows with a 4.5 percent interest rate, which will make the debt even more unsustainable, mainly by adding to the government’s gross financial needs (GFN).


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Greece Approved for $1.8 Billion Conditional Loan From IMF

by Marcus Bensasson, Viktoria Dendrinou & Andrew Mayeda

Bloomberg

July 21, 2017

The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.

The Washington-based fund said Thursday its executive board approved “in principle” a new loan worth as much as $1.8 billion. The disbursement of funds is contingent on euro-zone countries providing debt relief to Greece.

“As we have said many times, even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners,” IMF Managing Director Christine Lagarde said in a statement. “A debt strategy anchored in more realistic assumptions needs to be agreed. I expect a plan to restore debt sustainability to be agreed soon between Greece and its European partners.”

IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become “explosive” beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.

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Wednesday, July 19, 2017

Yes, Greece Can

by Marcus Ashworth

Bloomberg

July 19, 2017

Greece's hopes of returning to the debt markets after a three-year absence have been held up by one of its main creditors, the International Monetary Fund.

Under the strict conditions of its bailout, the country's debt burden is still too high to contemplate selling more debt, according to the IMF.

But there is a compromise option, which Greece should pursue.

The Hellenic Republic had been laying the groundwork to issue as much as 4 billion euros ($4.6 billion) in five-year bonds after repaying 6 billion euros of its existing debt this week. But the funds to pay down that debt came from the European Stability Mechanism, so Greece's overall debt hasn't been reduced, simply extended.

The IMF's opposition to issuing new debt doesn't stop Greece from shuffling its debt stack by lengthening maturities.

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