Greece set to fall short of bailout targets, as IMF says its debt is unsustainable

Data points towards modest recovery for country but will fail to meet 3.1% prediction

Photograph: iStock

Photograph: iStock


Greece is on track to fall short of budget-surplus targets set under a bailout by the nation’s euro-zone creditors, the International Monetary Fund said.

Greece’s primary budget surplus will rise to 1.5 per cent over the long run from about 1 per cent last year, amid a modest recovery, the IMF said on Monday after executive directors met to discuss the fund’s annual assessment of the nation’s economy. Still, the projected surplus falls short of the 3.1 per cent forecast by the country’s European creditors.

The fund reiterated its view that Greece’s debt is unsustainable. Most of the executive directors don’t believe the economy needs more fiscal consolidation, the IMF said.

The IMF has said it would consider giving Greece a new loan to supplement the €86 billion it is receiving from euro-area countries, but only if the nation’s debt-reduction plans are credible. Greece’s European creditors also want the IMF to sign off before disbursing the next tranche of the euro-zone bailout.

Greece’s government debt will reach 275 per cent of its gross domestic product by 2060, when its financing needs will represent 62 per cent of GDP, the IMF said in a draft staff report obtained by Bloomberg last month. Public debt will reach 181 per cent of GDP this year, the IMF projected Monday.

Greece’s economy is expected to grow 2.7 per cent this year, up from 0.4 per cent in 2016, the fund said. However, long-run growth is expected to slip to about 1 per cent, the IMF predicts.

The IMF’s assumptions aren’t based in reality and don’t take into account the reform of Greece’s public finances, according to a European Union official who spoke on condition of anonymity because the discussions are sensitive.