IMF urges debt relief as Greece accepts stern austerity measures

Austerity aheadThe International Monetary Fund (IMF) has urged European countries to extend debt relief to a beleaguered Greece, releasing a document literally hours before parliamentary debates in Athens and Berlin secured €86 billion in additional funding.

There are tough conditions attached to this latest bailout, including an increase on VAT on all goods and services as well as further restrictions on public spending.

The IMF has long been a proponent of European leaders giving Greece more debt relief. In its most recent document the IMF states: “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 problem is that the countries that have long fought to keep the IMF involved in the debt crisis, such as Germany, are also rigorously against extending further debt relief.

Greek prime minister, Alexis Tsipras, has launched scathing attacks on the Washington-based IMF. At one point he said the fund was “criminally responsible” for his country’s economic troubles.

From a UK perspective a healthier Greece is important. Algernon Percy, managing director of investment manager Waverton says: "It is more important for the UK economy that confidence in Greece, and indeed the Eurozone as a whole, is restored. For this to happen, the Greek economy needs to find a base from which it can build.”

The IMF does have a previous record of releasing important data close to significant events. Two days before the Greek referendum on whether to accept the EU’s bailout conditions, the fund released a Greece debt sustainability analysis, which stated: “If the package of reforms under consideration is weakened further—in particular, through a further lowering of primary surplus targets and even weaker structural reforms—haircuts on debt will become necessary.”

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