2015-07-15telegraph.co.uk

The International Monetary Fund has set off a political earthquake in Europe, warning that Greece may need a full moratorium on debt payments for 30 years and perhaps even long-term subsidies to claw its way out of depression.

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The underlying message of the report is that Greece is in such deep trouble that it cannot withstand further austerity cuts. This is hard to square with the latest demands by EMU creditors for pension cuts, tax rises, and fiscal tighting equal to 2pc of GDP by next year.

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Unless there is a change of course, Greece's debt ratio will still be 170pc of GDP by the time the current framework expires in 2022. Even this assumes that there is no global downturn, and that everything goes to plan. The figure is up from 142pc two weeks ago... Ashoka Mody, the former chief of Ireland's IMF rescue, said the original findings were "fictitious" and failed to recognize the full gravity of the debt-deflation crisis in Greece.

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The backdrop to this sudden shift in position is almost certainly political. It follows an intense push for debt relief over recent days by the US Treasury, the dominant voice on the IMF Board in Washington...

See also : The I.M.F. Is Telling Europe the Euro Doesn't Work (NYTimes) and IMF: Greece may need 30 years to recover (CNBC).



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