IMF Believes Greece Should Consider Debt Restructuring By 2012

C’est quand même incroyable, tout cet argent garantit, pour obtenir à toute fin une recommandation de : restructurer la dette.

Extrait de: IMF Believes Greece Should Consider Debt Restructuring By 2012, By COSTAS PARIS and IAN TALLEY, The Wall Street Journal, APRIL 16, 2011

WASHINGTON -- The International Monetary Fund believes Greece's debt is unsustainable and has told European government and central bank officials that Athens should consider restructuring by next year, three people familiar with the situation said Saturday.

"The IMF believes the debt situation in Greece is unsustainable," one of those people, who has direct knowledge of the matter, told Dow Jones Newswires. "Senior (IMF) officials have told the parties involved that restructuring should be considered soon," including the European Commission and euro-zone governments.

IMF spokesman William Murray denied the IMF was recommending a restructuring of all Greek debt including that held by private holders, but the IMF has said the fund has considered extending the loan repayment schedule for Athens, a form of restructuring.

"So far we're working with the program as it has been established," IMF Managing Director Dominique Strauss-Kahn said, speaking at a press briefing at the close of spring meetings here.

"For this program to work, we need two things: we need the country to do exactly as we said in the program, even if it's difficult," Mr. Strauss-Kahn said of Greece. "We also need our partners, namely the Europeans, to also do their homework in terms of crisis management."

Bien sûr, demander au peuple de rester au chômage pour les 20 prochaines années, pour tenter de sauver les banques françaises ou allemandes, allo … !

Bank expoxure PIGGS

Greece Finance Minister George Papaconstantinou said Greece isn't looking to restructure its debt. "The pain and cost of restructuring would be bigger than the benefits," he said at the spring meetings of the IMF. "Restructuring is not the position of the Greek government."

A second official familiar with the situation said a number of senior euro-zone officials, including finance ministers, have told the European Central Bank that they believe a restructuring of Greek debt will be necessary, but the response was that "such issues should not be discussed in the open."

"The ECB is flatly against any form of restructuring because of contagion fears. France is also against it," the second official said.

The first official said the IMF believes Greek bond maturities must be "substantially extended as a minimum first step." Reducing the principal that Athens must pay to its creditors may also have to be explored, the official said.

The IMF will most likely extend the repayment period of the around EUR30 billion it gave to Greece from three to seven years to align with the extension granted by the euro zone last month, the second official said.

The IMF has said it is open to moving its Greek loan program from its stand-by lending facility, which usually has a three-year repayment schedule, to its extended fund facility, which is for repayments up to 10 years. The board hasn't voted on the transition, but an IMF official said members are aware of negotiations and open to the proposal.

The extended fund facility was used by Argentina. Such a rescheduling of debt payments is essentially a type of restructuring.

"There is no other policy tool to get the debt sustainable except restructuring, unless you come out of the euro, which is extremely costly," said a second IMF official. He said the situation has gotten to the point where the IMF can no longer sign off on its quarterly review of its Greek program because it is difficult to say whether the debt is sustainable.

"Going into a soft restructuring you have to do it in away that the Greek banks are still solvent" because they still hold a significant portion--around EUR80 billion--of Greek sovereign debt, as does the ECB, the second IMF official said. But the policy instinct will be to lower the lending rates and reschedule the maturity for both the official sector debt--including the IMF and European Union loans--and the market's debt to spread the pain around, he added.

This IMF position would be a change from its stance that Greece will be able to recover if it strictly adheres to a multiyear austerity program in return for the bailout it received from the IMF and euro-zone partners last year.

Pas sûr, que le peuple va être d’accord !

The first official said euro-zone governments believe Greece will likely tap the European Financial Stability Facility next year to service its debt repayments as it will be unable to return to bond markets. Greece has to raise about €30 billion through long-term issuance.

Greece's entire debt at the end of last year:

·         Was about €340 billion ($490 billion).

·         About €80 billion is held by Greek banks and funds,

·         €50 billion by the ECB.

·         The EU and the IMF have so far given the country about €50 billion as part of the €110 billion bailout loan.

Plus de 110 milliards garantit par le peuple européen, pour constater que ce pays va restructurer sa dette, donc inexorablement  des pertes sur la garantît du prêt.

De plus, il va être impossible de remonter la pente du pays avec si peu de compétitivité, belle perspective, ah ! nos chers politiciens oligarchiques, ce qu’il ne faut pas faire pour protéger leurs institutions financières et maintenir la monnaie unique.

The scenario to be examined first will involve extending debt repayments by as much as 30 years, the first official said, where private bondholders could be offered new bonds in exchange for old bonds with the same coupon, but with a longer maturity. Another scenario could involve reducing Greece's coupon payments and extending maturity dates.

The European Commission, the EU's executive arm, is conducting a "sustainability review" with the IMF and aims to complete it in late spring or early summer, EU economics commissioner Olli Rehn told Dow Jones on Friday. This review is a normal part of the commission's quarterly economic assessments, but "this time it is of particular importance," Rehn said.

—Matthew Dalton contributed to this article