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Europe should expand debt relief measures for Athens to sustain Greece’s debt - IMF

July 15, 2015, 6:30 UTC+3 WASHINGTON
The new three-year bailout may reach between 82 and 86 billion euros
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© EPA/FRANCK ROBICHON

WASHINGTON, July 15. /TASS/. Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far, the International Monetary Fund (IMF) said in a report on Wednesday.

Greece’s "financing need through end-2018 is now estimated at 85 billion euros and debt is expected to peak at close to 200% of GDP in the next two years, provided that there is an early agreement on a program," the IMF said, adding that "this contrasts with earlier projections that the peak in debt-at 177% of GDP in 2014-is already behind us."

"The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date - and what has been proposed by the ESM [European Stability Mechanism]," the report said. The IMF says there are several options for that. "If Europe prefers to again provide debt relief through maturity extension, there would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt, including new assistance," the report noted. "Other options include explicit annual transfers to the Greek budget or deep upfront haircuts," it added.

However, "the choice between the various options is for Greece and its European partners to decide," IMF concluded.

The agreement with Greece was reached on Monday and the conditions for launching talks on the new aid package have been discussed, German Chancellor Angela Merkel told reporters in Brussels. "We have cleared the way towards new aid," Merkel said, stressing that writing off the country’s debt is not on the agenda.

Merkel stressed that there are now all the conditions for talks on aid for Greece as part of the European Stability Mechanism (ESM). The new three-year bailout may reach between 82 and 86 billion euros. The Eurogroup, an informal body of the ministers of the euro area member states, is ready to agree on additional measures if necessary, she added.

The compromise agreement was reached at the meeting of German Chancellor Angela Merkel, French President Francois Hollande, Greek Prime Minister Alexis Tsipras and European Council President Donald Tusk.

According to preliminary reports, the final decision on forming the third international package of macro-financial aid to Greece should be adopted by on July 15 by the Eurogroup, an informal body of the ministers of the euro area member states.

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