Benn Steil, Senior Fellow and Director of International Economics
The International Monetary Fund (IMF) is, with the European Commission and the European Central Bank, part of the so-called troika responsible for setting the conditions that the Greek government must meet to secure continued official financial support. Greece is the eurozone's largest IMF program beneficiary, with about €28 billion in outstanding loans from the IMF. Only the private sector has thus far been obliged to suffer write-offs, of €105 billion, on Greek debt.
Greece's massive debt restructuring in March of 2012 reduced the country's debt from 170 percent of gross domestic product to 150 percent—a level that still appeared unsupportable to many expert outside observers at the time. The IMF estimates that Greek GDP will fall a further 4.2 percent in 2013, after having fallen 16 percent between 2009 and 2012. Greek debt now stands at 157 percent of its GDP.
A recent IMF report argued that Greek debt should have been restructured much earlier, in 2011. The IMF is now threatening to suspend further aid disbursements to Greece unless a new €3-4 billion gap can be plugged by Greece and its eurozone creditors.
Would Greece be in a better position today if the IMF had addressed the crisis differently, after it was first approached for assistance back in 2010? The IMF is a lending institution and does not give grants-in-aid, so the best it could have done would have been to pressure Greece and its creditors to work out an earlier restructuring and a more credible official eurozone assistance package, using the withholding of IMF lending facilities as a stick. Given that Greece's eurozone creditors were in steadfast denial that write-offs or outright transfers were necessary or desirable, however, such a strategy would, at best, only have brought about a slightly earlier—but still insufficient—restructuring.