MercoPress. South Atlantic News Agency

Private sector involvement fundamental for Greek bailout, says IMF

IMF mission chief for Greece, Poul Thomsen, ‘with no reforms, debt not sustainable’

The IMF said private sector involvement was fundamental to a Greek bailout and urged Athens to move faster on fiscal and structural reforms to avoid debt default.

The IMF which provided a 110-billion-Euro lifeline to Greece along with the EU a year ago said Athens has put in place measures to correct past inertia blamed for missing some bailout deal targets and now implementation was crucial.

“If reforms are not in place, debt is not sustainable, that's for sure,” the IMF mission chief for Greece, Poul Thomsen, told a conference call.

The IMF said Euro zone countries needed to decide how they would help Greece and that private sector involvement (PSI) in a second bailout for the country was appropriate.

“Given the impact PSI could have on Greece's credit rating, it is imperative for Euro area member states to put in place mechanisms to guarantee liquidity support to Greece's banking system while a PSI operation is undertaken,” it said.

The bailout foresaw Greece returning to bond markets in 2012 but high borrowing costs are keeping the debt-ridden country away, forcing Greece's partners back to the drawing board to keep the debt crisis spreading to the rest of the euro zone.

The IMF said Greece had hired advisers to help design private sector voluntary debt rollover and that more time was needed to flesh out proposals. Its staff had cautioned the government against giving incentives for creditors to participate, it added.

“The scope of the PSI operation is under discussion, but would likely extend through at least mid-2014 and aim to draw in wide participation by the private sector to deliver a substantial reduction in Greece's funding needs,” it said.