LONDON (SHARECAST) - The International Monetary Fund (IMF) is “privately pushing” Greece to quickly restructure its debts, according to German news magazine Der Spiegel.
The magazine said that high-level representatives from the IMF have pushed for a restructuring in recent talks with delegates from European governments, as its debt burden is now equal to around 150% of the nation’s gross domestic product (GDP).
However, in Barclays Capital’s (BarCap) view, while a restructuring may inevitably be on the cards in the future, at this stage it seems unlikely.
“We think it still is too early to engage in restructuring discussions. In addition to the elevated contagion risks, Greece continues making progress on fiscal consolidation and structural reforms, albeit with some setbacks. Both are key toward the stabilization of debt/GDP over the medium term,” said the broker.
Spiegel Online said: “Among the options that the IMF suggested are that holders of Greek debt could take a so-called haircut, maturities could be extended or interest rates on Greek sovereign debt could be reduced. All three alternatives would involve owners of Greek sovereign bonds giving up a portion of their returns.”
While BarCap thinks that it is too premature for a restructuring, it does recognise that debt dynamics are indeed “challenging”.
“If fiscal consolidation fails to make further substantial progress toward primary balances above 4% of GDP by 2013/14 or growth fails to resume from 2012 onwards, debt to GDP would fail to stabilize, and at that point some form of debt restructuring may be needed to put debt/GDP on a sustainable path,” BarCap said.
