ANALYSIS:THE INTERNATIONAL Monetary Fund believes Greece's debt is unsustainable and that the country's government should consider a restructuring as early as next year, the Wall Street Journalhas said, citing three unidentified people familiar with the situation.
Senior IMF officials have told European Commission and euro-zone governments that a restructuring should be considered, the paper said.
The IMF, which has not recommended a restructuring of all the country’s debt, has considered extending its loan repayment schedule, IMF spokesman William Murray told the paper.
Euro zone officials, including finance ministers, have said it is necessary to restructure Greece’s debt and the European Central Bank responded by saying it did not want a public discussion, an unidentified official familiar with the situation said.
A first step would be to substantially extend Greek bond maturities, another unidentified official said, according to the paper.
That may include extending debt repayments by as much as 30 years, the official said.
Meanwhile, the IMF has questioned whether the US would meet a pledge to halve its budget deficit by 2013, eliciting a swift response from the Treasury Department which insisted the promise would be kept.
The IMF also took the Obama administration to task over its housing policy, and said the US ought to count its commitments to housing finance giants Fannie Mae and Freddie Mac on its already swollen balance sheet.
“The IMF suddenly is doing its best to seem even-handed,” said Eswar Prasad, a Brookings Institution senior fellow and a former IMF official.
Mr Prasad pointed to two factors behind the tougher tone: emerging markets have pressed the IMF to take a harder look at the advanced economies that caused the 2007-2009 financial crisis; and the US hasn’t strenuously objected to the louder criticism.
US treasury secretary Timothy Geithner said on Saturday that Washington welcomed “continued IMF surveillance of our fiscal and monetary policies.”
The IMF’s tone shifted after its internal watchdog issued a report in February that said the fund failed to spot the financial crisis brewing, in part because it was “overly influenced by and sometimes in awe of” rich nations.
Emerging markets that had been on the receiving end of sometimes unwanted advice from the West have begun openly questioning US-led economic orthodoxy.
“Some of the countries that are responsible for the deepest crisis since the Great Depression, and have yet to solve their own problems, are eager to prescribe codes of conduct to the rest of the world,” Brazilian finance minister Guido Mantega told the IMF’s steering committee on Saturday.
Many emerging markets have built up huge stockpiles of currency reserves, partly as a form of self-insurance so that they will never again have to come hat in hand to the IMF.
That has emboldened them to demand the IMF treat misbehaving advanced economies the same way that emerging markets were treated when they suffered similar crises.
The US is one of seven countries the G20 rich and emerging economies designated for special review to determine whether their domestic policies risked destabilising the global economy.
The IMF is responsible for conducting the reviews.
