Gossip, Gossip, just stop it......
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(Bloomberg)--The International Monetary Fund may transform its loan to Greece into a longer-term repayment plan, a move that would allow the country to pay its loan back later without restructuring, European Central Bank Executive Board member Lorenzo Bini Smaghi said.
“The IMF is certainly thinking of these issues,” Bini Smaghi said in a speech in Washington. “There are mechanisms in the IMF to prolong packages.” “There is a standard procedure which has been implemented many ways, in which the IMF transforms short-term programs to longer-term programs” when it sees a country is on track, he later told reporters.
Asked about the idea, ECB governing council member Ewald Nowotny said stretching out payments did not constitute a restructuring, which was not under discussion. Calls to the Greek delegation in Washington were not immediately returned.
“We have developed a good joint program for Greece by the EU Commission, ECB and IMF,” Nowotny told reporters today in Washington. “That’s why I don’t see a perspective for a discussion on a restructuring.” Klaus Regling, chief executive officer of the newly established European Financial Stability Facility, also indicated such a restructuring was not on the table.
IMF Mechanisms
“Nobody said that,” Regling said. Bini Smaghi “only talked about funds provided by the IMF and that’s indeed a normal, or common procedure by the IMF to think again about maturities. The IMF has mechanisms for that, but that doesn’t concern primarily markets.” Bini Smaghi is a former director general of Italy’s Treasury who joined the ECB in 2005. The IMF press office in Washington did not have an immediate comment.
Greek markets have been battered since the end of last year when the newly elected government led by Prime Minister George Papandreou said the budget deficit was twice as big as the previous administration indicated. The disclosure forced Greece to tap a 110 billion-euro ($153 billion) loan facility in April from the European Union and IMF after being shut out of the debt market.
Greek Finance Minister George Papaconstantinou yesterday said investors who didn’t turn their backs on his country’s debt are seeing returns. At April’s IMF Fund annual meeting, Papaconstantinou said investors would “lose their shirts” if they bet the cash-strapped nation was going to default.
‘Smart Money’
“The smart money is realizing Greek bonds are a good investment,” he told reporters in Washington. “However, we cannot return to the markets at the moment with bond issues, as the cost of borrowing will be high,” Greek bonds were Europe’s top performers last quarter, gaining for the first time since the debt crisis began. Investors still demand a yield premium of 752 basis points to lend to Greece rather than Germany for 10 years, the most of any euro nation. That’s down from a euro-era record of 973 basis points on May 7.
A growing number of Greeks believe the government didn’t have to ask the IMF for the emergency loans, according to an opinion poll. Nearly 66 percent of 1,183 Greeks think the country could have avoided asking for the funds, compared with 42 percent in April, according to the survey, conducted by Kapa Research and published in To Vima newspaper today.
Greece agreed in May to cut wages and pensions and raise taxes in return for emergency loans from the IMF and the European Union. Papandreou argued that the measures, to tame a budget deficit of almost 14 percent of economic output, were needed to prevent the country from defaulting on its debts after borrowing costs soared.
To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Flavia Krause-Jackson at fjackson@bloomberg.net
Tue May 03, 2016 9:51 am by Andrea ForexMart
Subject: IMF Considers Extension of Greece's Loan Package, ECB's Bini Smaghi Says 
