By Paul Taylor
BRUSSELS, July 3 (Reuters) – Euro zone countries tried in vain to stop the #imf publishing a gloomy #analysis of #greece‘s debt burden which the leftist government says vindicates its call to voters to reject bailout terms, sources familiar with the situation said on Friday.
The document released in Washington on Thursday said Greece’s public finances will not be sustainable without substantial debt relief, possibly including write-offs by #european partners of loans guaranteed by taxpayers.
It also said Greece will need at least 50 billion euros in additional aid over the next three years to keep itself afloat.
Publication of the draft Debt Sustainability Analysis laid bare a dispute between Brussels and the Washington-based global lender that has been simmering behind closed doors for months.
Greek Prime Minister Alexis Tsipras cited the report in a televised appeal to voters on Friday to say ‘No’ to the proposed austerity terms, which have anyway expired since talks broke down and Athens defaulted on an IMF loan this week.
It was not clear whether an arcane IMF document would influence a cliffhanger poll in which Greece’s future in the euro zone is at stake with banks closed, cash withdrawals rationed and commerce seizing up.
“Yesterday an event of major political importance happened,” Tsipras said. “The IMF published a report on Greece’s economy which is a great vindication for the Greek government as it confirms the obvious – that Greek debt is not sustainable.”
At a meeting on the International Monetary Fund’s board on Wednesday, European members questioned the timing of the report which IMF management proposed at short notice releasing three days before Sunday’s crucial referendum that may determine the country’s future in the euro zone, the sources said.
There was no vote but the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication, the sources said.
The Europeans were also concerned that the report could distract attention from a view they share with the IMF that the Tsipras government, in the five months since it was elected, has wrecked a fragile economy that was just starting to recover.
“It wasn’t an easy decision,” an IMF source involved in the debate over publication said. “We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives.”
The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum.
“Facts are stubborn. You can’t hide the facts because they may be exploited,” the IMF source said.
IMF spokeswoman Angela Gaviria declined comment on this report.
Greek Finance Minister Yanis Varoufakis said in a blog post the IMF had upheld the Syriza party government’s contention for the last five months that debt relief should be at the center of the negotiations.
“Puzzlingly, all this fine research by the good people at the IMF suddenly evaporates when IMF functionaries coalesce with their ECB and the European Commission colleagues in order to impose upon our government their chosen policies,” he wrote.
The IMF argues that Greece’s debt burden of nearly 185 percent of gross domestic product can only be made sustainable if the euro zone provides considerable extra financing through a mixture of new loans and a debt restructuring.
This is politically anathema in Germany, the biggest creditor country, and most other euro zone states, where no leader wants to explain to taxpayers that the money they lent to Athens will never be coming back.
Euro zone governments insisted in five months of talks this year that a lengthening of loan maturities and a reduction in interest rates would only be considered after Greece had implemented its commitments under a 2012 bailout deal, including painful structural reforms and public spending cuts.
In Brussels, the way the IMF communicated the findings was seen as confusing, misleading and politically unhelpful.
The European Commission had produced its own debt sustainability analysis, based partially on IMF data, which is less pessimistic in its scenarios and is one of the documents mentioned on the Greek referendum ballot paper.
Diplomats said the IMF’s publication of the study was a way of making clear it would only be part of any future loan pact with Greece if the Europeans included debt relief in the mix.
Germany and its north European allies have said the IMF’s presence is indispensable both to win parliamentary backing for aid for any euro zone partner, and to keep the European institutions honest. Berlin suspects the European Commission of being too soft on Greek efforts to wriggle out of reforms of pensions, taxation, public sector wages and labor law.
The European Central Bank, the third partner in what used to be called the “troika” of bailout enforcers, is also keen to keep the IMF involved. (Additional reporting by David Chance in Washington; editing by Anna Willard)
Featured Photo credit to hl.co.uk