The International Monetary Fund issued a stark warning that Greece would need far more debt relief to keep it in the eurozone than European creditors have been willing to consider.
An IMF report leaked to Reuters shows that Greece’s public debt - which it called "highly unsustainable" - is likely to peak at 200% of GDP or national income over the next two years.
“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 IMF said in the analysis, which follows a similar study released July 2. but its new assessment comes after a period when cash withdrawals from banks have been limited to €60 a day and businesses have been starved of working capital.
The closure of banks and the introduction of capital controls were “extracting a heavy toll on the banking system and the economy, leading to a further significant deterioration in debt sustainability relative to what was projected in our recently published DSA,” the IMF said.
The fund said there are several options for bringing Greece’s finances under control, these include dramatically extending the terms of the loans, offering deeply discounted interest rates and writing down the debt — something Greece's European creditors have resisted.
“The choice between the various options is for Greece and its European partners to decide”the IMF said in its analysis.