Representatives of leading emerging market countries at the IMF have warned the Fund's management against pouring more large sums of money into Greece's second bailout, the Financial Times reported on Thursday.
Citing conversations with representatives of non-European economies, the paper said several governments were unwilling to risk financial contagion by curtailing IMF lending to Greece, but alarmed at the risks the fund was taking.
It said Brazil's IMF director Paulo Nogueira Batista, a member of the 24-strong Executive Board which steers the Fund's day-to-day operations, believed the Greek government's austerity plan was too tough and that the restructuring of Greek debt held by European banks was too small.
Greece is not having an easy time, the paper quoted him as saying. The mostly European private creditors of Greece have had an easy time.
It also quoted another director, India's Arvind Virmani, as saying the deal agreed by Euro zone leaders last week dealt with short-term cash flows but left Greece with a large and precarious sovereign debt stock, threatening further defaults.
I am not convinced ‘the plan’ addresses the basic problem of liquidity versus solvency, the FT quoted him as saying.
The second Greek bailout envisages 109 billion Euros in additional official funding from Europe and the IMF, but Euro zone leaders have not said how much they expect the IMF to contribute, and the Fund has not commented. In past Euro zone bailouts, the IMF has contributed one-third of the total sum.