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Greece says IMF report justifies debt stance

Published:Friday | July 3, 2015 | 12:00 AM

The International Monetary Fund's (IMF) report on Greece "completely justifies" Greece's position on debt sustainability, the Greek government has said.

In a report released Thursday, the IMF said Greece needs both debt relief and €50 billion (US$56 billion) in new financing from October through 2018.

Prime Minister Alexis Tsipras' government has long argued that any new deal with Greece's creditors would have to address the country's debt by including some form of restructuring or debt relief.

Government spokesman Gabriel Sakellaridis says the IMF report "constitutes a confession of failure of the (Greek bailout)".

Others criticised the report. Ashoka Mody, a visiting professor at Princeton University, said it shows the IMF and the European Union were not "negotiating in good faith" with Greece since they did not talk about debt relief.

Mody told The Associated Press that "if the IMF and other creditors had this document while they were negotiating with the Greeks, it is completely unconscionable that they did not discuss deep debt relief."

Mody believes Greece's creditors need to write down the country's debt by perhaps half and stop insisting that the Greek government cut spending and raise taxes. He says austerity measures have proven counterproductive, driving the Greek economy into recession and making it harder for the country to repay its debts.

The IMF has also put the blame for Greece's current economic predicament largely on the Greek government of Prime Minister Alexis Tsipras.

It noted, for example, that Greece has been slow to privatise state assets. In 2011, the IMF predicted that Greece would raise €50 billion from selling off state properties by the end of 2015; so far, it has only raised €3.2 billion through privatisations.

The fund said Thursday that Greece's finances have deteriorated because Athens has been slow about enacting economic reforms. Last year, the IMF predicted Greece's debt would fall from 175 per cent of economic output in 2013 to 128 per cent in 2020. Now it sees Greece's debts at 150 per cent in 2020.

The IMF says creditors must offer Greece discounted interest rates and a longer repayment period.

The analysis was made before Greece defaulted on IMF loans Tuesday and closed its banks Monday. The outlook is worse now.

Greeks vote Sunday on whether to accept demands that creditors were proposing to resolve a debt standoff.

Banks open Tuesday

Meantime, here's the question all Greeks want to know: When will the banks reopen?

Greek Finance Minister Yanis Varoufakis had an answer for that and other key questions posed to him Thursday by reporters ahead of Sunday's referendum on whether Greece should accept creditors' demands for more austerity in exchange for more loans.

Will the banks reopen? Varoufakis said: "Of course, they'll open! Of course!"

When will that be? He replied: "On Tuesday."

Will the banks reopen with or without a deal between Greece and its creditors? Varoufakis said: "With a deal, which is a certainty."

European leaders have said if the vote goes Varoufakis' way and Greeks reject the demands, Greece will face financial chaos and eventually be pushed out of the 19-nation Eurozone.

- AP