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The most recent example of the IMF’s interventionism with regard to nations and their debts came with last week’s provocatively-timed conclusion that Greece’s sovereign debts were unsustainable. European creditors such as Germany, the IMF warned, had to accept that, despite their discomfort at the idea, those debts would have to be restructured for Greece to survive as a member of the eurozone.
That analysis, released just days before Sunday’s referendum, was quickly seized on by the government in Athens. Greece now has the backing it needs to press a convincing case for the debt relief it has long sought.
Yet nowhere in that paper was there more than a glancing mention of what at least in the short term remains one significant bit of Greece’s debt burden: the €22.5bn Athens owes the IMF itself. And that is where the fund, which for weeks has been publicly touting its “flexibility” in negotiations with Greece, may need to think more creatively.
Greece earned an ignoble place in economic history last week when it missed a €1.5bn payment and became the first advanced economy to default on the IMF in its 71-year history.
But hours before doing so the government in Athens did what it had informally done at least once before and requested an extension. The request was not granted at the time, but it will soon go to the IMF’s board for what should be a vigorous discussion.