June 3, 2011

IMF Should Make Greece Restructure, Negotiate Haircuts: Former IMF Director

Claudio Loser also says Greece could benefit from leaving euro zone

A former director of the Western Hemisphere for the International Monetary Fund (IMF) said on Friday that instead of extending additional loans to Greece, that body should instead urge Athens to restructure its debt and press for haircuts from bondholders.

Reuters reported that Claudio Loser, who assisted in negotiating the bailouts given to Argentina and Uruguay by the IMF, also said that Greece could benefit from abandoning the euro as its currency as it works to straighten out its economy.

He added, however, that such an action would create a major problem for the euro.

"Greece will have to take one or two of the two actions—restructuring with a haircut and maybe abandoning the euro, although I would say abandoning the euro will be more complicated,” Loser said, according to Reuters.

His statement came as Greece prepares to receive yet another bailout from the IMF and the European Central Bank (ECB) and presented a new austerity plan to officials in another attempt to stave off default.

Prime Minister George Papandreou went to Luxembourg on Friday, where he was to outline a medium-term budget plan for even more severe spending cuts, higher revenues and a speedier divestiture of state assets to raise funds. The plan was to be presented to Jean-Claude Juncker, chairman of finance ministers of the 17-nation euro zone.

A senior Greek government official was quoted in the report saying, "The prime minister will present the main points of the midterm plan to Juncker, which include speedier privatizations and new measures to cut government spending and raise revenues."

The plan is not popular in Greece, where demonstrations by trade unions and students were held in protest even as some members of Papandreou's own party voiced their opposition. Protesters took over the finance ministry building, where they hung a banner and replaced the European flag with their own union flag, saying the new plan would "turn workers into modern slaves.”

 Ministry staff were forced to work from another building as the protesters said they would remain for the whole day. They also called for a general strike in opposition to the plan.

Reprints Discuss this story
This is where the comments go.