IMF Won’t Disburse Greek Loan If Debt Not Sustainable

The International Monetary Fund won’t disburse its share of the Greek bailout if the country’s debt is not deemed sustainable or if other creditors don’t pledge to fill a financing gap in the aid package, a fund spokesman said.

IMF Managing Director Christine Lagarde last week warned that the level of Greek debt would have “to be addressed,” pushing European policy makers to consider writing off some of the aid to the country. While the fund is sticking to a target of 120 percent of gross domestic product by 2020, the Greek government forecast this week that public debt will climb to 179.3 percent of GDP in 2013.

For the loan “to move forward, we need two key elements -- we need the debt sustainability and the financing assurances and both of those things need to be in place,” IMF spokesman Gerry Rice told reporters in Washington today. “As to how these requirements will be fulfilled in the context of the current review, we still have to discuss this with the Greek authorities and the European partners.”

While Lagarde also said last week Greece faces a financing shortfall that won’t be solved with just the budget measures currently being discussed, the IMF has indicated that any additional aid will have to come from Europe.

Rice said today he couldn’t give a date for the end of talks taking place in Athens, even though “urgency is of the essence.” His comments on the IMF’s requirements for disbursement suggest that an agreement on measures to reduce the deficit won’t suffice to unblock the funds as part of the 130 billion-euro package ($169 billion)

Regarding Spain, Rice said that an IMF team will visit Madrid from Oct. 15 to Oct. 26 to monitor the country’s banking bailout and will submit its report to the government and the European Commission.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.