The IMF has urged Eurozone public debtholders of Greek bonds to take larger haircuts, as the country is in worse shape than thought. Greece is already in talks with private sector bondholders, including banks and pension funds to take haircuts on the bonds.The private creditors are represented by the IIF the Institute for International Finance.
Greece needs its creditors to wipe away 70% of the value of the bonds they hold. The current debt to GDP is greater than 160%,and the new dealwould shave it to 120%.
George Soros has predicted that Greece will default and exit the Eurozone. The UK PM Cameron wants the Eurozone to do more before relying on the IMF which the UK contributes to.
The country which had four straight years of economic decline, badly needs the deal where private creditors agree to take haircuts on its bonds. An outline deal, hurriedly endorsed by Brussels, came after a frantic three days of negotiations that at one time appeared to be heading for deadlock.
It appeared that Greece had secured a deal to pay a lower interest rate on its bonds last week, but talks ended abruptly when the head of the IIF Dallaria left Athens without securing a deal.
Spain which now has 5.3 million unemployed has warned its Eurozone partners that they must be realistic about austerity. Austerity in Greece has so far led to a worsening of Greece’s debt to GDP ratio, and the same outcome will occur in Spain if austerity alone is prescribed to.