Claim that IMF will cut off aid to Greece

Mon, Jul 23, 2012, 01:00

A GREEK insolvency in September has become more likely, with the International Monetary Fund reportedly refusing to make further rescue payments to the crisis-racked country.

The claim, by an unidentified senior European official in Der Spiegel yesterday, follows the European Central Bank’s decision on Friday to no longer accept Greek sovereign bonds as loan collateral.

Though the latest review of Greece’s EU-IMF programme is ongoing, the European official said it was “already clear” that Greece could not meet its promise to cut debt to 120 per cent of annual economic growth by 2020.

An IMF pull-out would create a funding shortfall of up to €50 billion in the Greek programme, which euro zone countries are reportedly unwilling to shoulder.

Euro zone leaders are still hopeful of being able to prop up Greek finances until the permanent bailout fund – the European stability mechanism – is operational, but a growing number of EU politicians no longer view a departure of Greece from the currency bloc as a disaster.

German economics minister Philipp Rösler said he was “more than sceptical” about the chances of Athens sticking to its reform promises, and an end to payments would see “the Greeks coming to the conclusion that it is perhaps wise to leave the euro zone”.