IMF May Consider Greek Loan Changes After Visit Next Week

IMF May Consider Greek Loan Changes After Team Visit Next Week
Outside the Hellenic stock exchange in Athens on June 21, 2012. Photographer: Chris Ratcliffe/Bloomberg

An International Monetary Fund team will start negotiating possible changes to the conditions attached to a loan to Greece after a fact-finding mission travels to Athens early next week, a fund spokesman said.

The mission, which includes officials from the European Central Bank and the European Commission, “will assess the recent economic developments and meet with the new authorities,” Gerry Rice, the IMF spokesman, told reporters in Washington today. He said he had no date for the follow-up negotiating mission.

“The objectives of the program as agreed remain the basis for those discussions,” Rice said. “If the new government has ideas on how those program objectives can be achieved, we’re open to those discussions.”

Greek Prime Minister Antonis Samaras asked fellow European leaders to loosen budget-austerity requirements for emergency aid while saying he would press ahead with an economic overhaul. Greece has slipped behind budget-cutting targets that euro-area nations and the IMF imposed in exchange for 240 billion euros ($298 billion) in aid pledges in the past two years.

In a letter to euro-area government heads, Samaras said a Greek recession in its fifth year and record unemployment of 23 percent require changes to targets for spending cuts demanded in return for international loans. At stake is whether Greece can stay in the 17-nation euro.

Unemployment, Recession

“There is a question of some necessary modifications to the program in order to control unprecedented unemployment and halt the devastating recession Greece is going through,” Samaras said in the June 27 letter released today in Brussels by Greek officials attending a European Union summit. Samaras, who became premier on June 20, couldn’t attend the EU meeting because he underwent eye surgery on June 23.

“Our priority is to listen to the new government and to hear their views,” Rice said. The IMF estimates that the Greek authorities “can manage the budget for some period of time” without the next loan disbursement, according to the spokesman.

In Brussels, European Union leaders focused on immediate help for Spain and Italy at the start of a two-day summit intended to chart a path out of their financial crisis.

The 27 government chiefs will discuss buying Spanish and Italian government bonds to bring down borrowing costs that are near euro-era records, Finnish Prime Minister Jyrki Katainen said. He also proposed that bailout funds buy collateralized government debt in primary markets.

The euro slipped 0.3 percent to $1.2428 at 12:58 p.m. New York time. The Spanish 10-year bond yield rose three basis points to 6.96 percent, after climbing above 7 percent for the first time since June 20. Crude oil tumbled 2.2 percent to $78.46 a barrel.

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