The IMF is open to delaying Greece’s repayment of its international loans, but believes a major restructuring of its debt would create untold problems in the eurozone, a fund official said on yesterday.
A senior Greek official also said that the government expected parliament to vote by the end of this month on its medium-term austerity plan, a condition for a new international bailout by the IMF and EU.
Athens has made progress in tackling its debt crisis, but cannot afford to relax the pace of reforms, the IMF’s senior representative in Greece Bob Traa told a banking conference.
“Greece is at a critical juncture and has no time to waste, now is not the time to slow down,” he said.
Athens is struggling to avoid defaulting on its debt, which totals 340 billion euros or about 150 percent of GDP.
EU officials are struggling to find a solution for its financing needs for coming years which both avoids triggering a default and pushes some of the burden onto the private sector.
“If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the eurozone,” Traa said.
However, he did hint that the IMF was open to other solutions.
“Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortization right at the end of the program. This is a technical issue we can think about,” he said.
Greece has already won an extension of the time it has to repay loans extended under last year’s 110 billion euro rescue mounted by the EU and IMF.
Traa did not say whether his comments referred only to Greece’s official international lenders or whether terms could also be stretched for debt held by commercial creditors.
Eurozone politicians, including German Chancellor Angela Merkel, have made clear that private creditors must share some of the burden in a second rescue, which Greece agreed with the IMF, EU and European Central Bank on Friday.
Earlier, the senior Greek official said the government also planned to cut corporate tax — a demand of the conservative opposition — and reduce value-added tax from next year.
However, these measures would not be part of the medium-term economic plan, he told reporters after a marathon cabinet meeting which began on Monday, but carried on into yesterday.
“Parliament will vote on the medium-term plan by the end of June. It will be voted on as a single article,” he said, asking not to be named.
Dissenters within the ruling PASOK party have demanded that each part of the plan, which includes 6.4 billion euros in new austerity steps this year and accelerated sales of state assets to cut the budget deficit, be handled in separate votes.
Voting on the plan as a single package would prevent the doubters from rejecting individual measures such as tax increases or sales of state assets.
The official signaled that the government had offered a concession to the opposition New Democracy party, which has demanded a corporate tax cut to stimulate the economy in return for its support for the latest austerity drive.
“In September, there will be a new tax law lowering VAT and corporate tax rates from 2012. The law will be fiscally neutral,” he said, without providing details.
A second official repeated government assurances that it would not seek early elections despite daily mass protests against yet more budget cuts.
The EU has called on all leading Greek parties to forge a consensus on the medium plan, which covers a period beyond the next scheduled elections in 2013.
Two senior government officials also said the government was not planning a referendum on austerity measures, even though Greek Prime Minister George Papandreou said on Monday that he was open to studying legislation allowing such votes.
Greece already has such an article in its constitution, and it was not clear whether he was referring to this, or the possibility of amended or new legislation.
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