IMF, "Bleak Picture for Greece"

Wall Street Journal Report, yesterday

IMF Staff latest Country Report for Greece (Pdf)


Wall Street Journal report further excerpts:

By Ian Talley of DOW JONES NEWSWIRES

"The International Monetary Fund warned Friday Greece's loan program faces "exceptionally high" risks, and said Athens may need further debt restructuring and additional financing that Europe should cover.

"A disorderly euro exit would be unavoidable" without continued support, fund staff said.

IMF economists painted the bleakest picture yet of Greece's outlook just a day after the fund's executive board approved a EUR28 billion ($36.9 billion) loan for the country...

A 231-page staff report on the new loan program outlines the fund's strategies and risks involved in returning Greece back to economic health, providing the basis for IMF Managing Director Christine Lagarde's Thursday warning, "there is no room for slippages."

IMF staff said Greece can't absorb any adverse shocks or program failures, otherwise risking much higher debt levels. Officials are particularly concerned about the ability of Athens to politically deliver on the tough economic-overhaul policies Greece promised to win more than EUR200 billion in loans and debt forgiveness. In the near term, fund staff are concerned upcoming elections in Athens may mean new leaders aren't as committed to overhaul policies.

"Materialization of these risks would most likely require additional debt relief by the official sector and, short of that, lead to a sovereign default," IMF staff said...

Given the challenges and Athens's track record of failing to meet targets under its old loan program, the new loan package "is subject to exceptional risks," they said. "Greece will remain accident prone," with debt expected to remain so high for such a long time, they added...

The IMF warned even if Greece implements the program fully, it could take more than a decade for the country to fix its competitiveness problem..."

ian.talley@dowjones.com
--Stelios Bouras in Athens contributed to this article.

UPDATE Interesting comments from Democracy Street