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EU, IMF working on way to ease Greek debt burden: ECB's Nowotny
[VIENNA] The European Union and International Monetary Fund are working on a way to reduce the debt burden of Greece by extending maturities and reducing interest rates, a European Central Bank policymaker said on Monday.
Greece has long argued that its debt is not sustainable and it needs relief to make its bailout deal, announced in July, sustainable. The IMF has also raised doubts about the sustainability of Greece's debt, which it is assessing before deciding whether to take part in the country's latest bailout programme.
European countries led by Germany, however, have resisted the idea of debt relief, openly ruling out a haircut on grounds that it was not legal and arguing that Greece has already received some relief as the bailout deal means lower interest rates and delayed repayments. "A solution is being found between the EU and the monetary fund in which no haircut is made, but I extend the loans' term massively and de facto reduce the debt burden," Nowotny told a panel discussion in Vienna.
Greece was given an 86 billion euro (US$92 billion) bailout package but a test on the health of its banks was better than expected indicating that they need less capital than earlier feared and the final program will be smaller than originally seen.