IMF Bolsters Greek "No" Vote, Says Country Needs Debt Haircut

If the IMF were a Greek citizen, it would vote "No" in this weekend's referendum.

Submitted by Tyler Durden: According to a report prepared prior to capital controls and the banking sector meltdown, any deal that included creditor concessions on fiscal reforms would mean Greece's debt load would have to be written down. 
This underscores the IMF's long-standing position that EU creditors will ultimately need to write down their holdings if Greece has any hope of returning to a situation where the country's debt-to-GDP ratio is "sustainable," and suggests that Syriza is indeed making a smart move by holding out. 

• COMPREHENSIVE DEBT OPERATION IS REQUIRED TO RETURN GREECE TO ECONOMIC HEALTH
• GREECE NEEDS EITHER A DEBT WRITE-DOWN OR MATURITY EXTENSIONS UNDER LATEST CREDITOR PROPOSAL
• GREECE'S ADDITIONAL FINANCING NEEDS THROUGH 2018 TOTAL ABOVE EUR60 BILLION
• GREECE'S YEAR-AHEAD FINANCING NEEDS ALONE TOTAL EUR29 BILLION
• CAPITAL CONTROLS ARE LIKELY TO PUSH UP FINANCING AND DEBT RELIEF NEEDS
• "IMPERATIVE" EUROZONE COVERS AT LEASE EUR36 BILLION IN FINANCE UNDER HIGHLY CONCESSIONAL TERMS
• IMF PROPOSES EXTENDING GREECE'S DEBT MATURITY TO 40 YEARS FROM 20 YEARS CURRENTLY
• TO MEET THE 2012 DEBT-SUSTAINABILITY TARGETS FOR GREECE, EUROPE WOULD HAVE TO WRITE DOWN DEBT BY 30% GDP
• GREECE'S DEBT IS UNSUSTAINABLE WITHOUT DEBT RELIEF UNDER EUROZONE'S LAST GREEK BAILOUT OFFER
• EUROZONE MUST PROVIDE DEBT MATURITY EXTENSION "AT A MINIMUM"
• GREEK DEBT-SUSTAINABILITY REVIEW ASSUMES LONG-TERM AVERAGE REAL GDP GROWTH OF 1%
• LONG-TERM AVERAGE REAL GDP GROWTH OF 1% FOR GREECE MAY BE OPTIMISTIC
• A LOWER BUDGET TARGET THAN LAST GREEK CREDITOR OFFER WOULD REQUIRE EUR50 BILLION DEBT WRITE-DOWN
• A LOWER BUDGET TARGET THAN LAST GREEK CREDITOR OFFER WOULD ALSO NEED CONCESSIONAL FINANCING THROUGH 2020
• EVEN WITH DEBT RELIEF, LAST CREDITOR BAILOUT OFFER WOULD STILL SEE GREECE'S DEBT RATIO AT 142% GDP THROUGH 2022
• IMF ASSUMES GREEK GDP GROWTH OF 0% IN 2015, 2% IN 2016 AND 3% IN 2017
• A GROWTH SHOCK WOULD SPIKE GREECE'S DEBT RATIO TO 200% OF GDP IN 2017

Here's more, via MNI:

The report was drafted before the shutdown of the Greek banking sector and is dated June 26. Although the report has "not been approved (by the) IMF's Executive Board" it concludes that Greece has "substantial financing needs" which would render the debt dynamics unsustainable.

The report argued that any agreement for a softer reforms package such as lower primary surpluses, weaker structural reforms or lower than expected privatization revenues would make the haircuts on the debt "necessary."

"Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30% of GDP would be required to meet the November 2012 debt targets," it added.

Recall that in 2011, Citi estimated that if Athens waited until 2015, a haircut of 94% would be necessary to bring the debt-to-GDP ratio down to 60%:

   IMF Greek Sustainabnility Analysis

Source 

X art by WB7