IMF Seen Approving Greek Loan Friday Despite Officials’ Fears

Wall Street Journal
July 6, 2011

Some International Monetary Fund officials — including executive directors on the Fund’s board — fear the Greece loan program will ultimately prove unsustainable.

Despite those concerns, the IMF board is expected to approve the next tranche of loans to Greece to stem the sovereign debt crisis from spilling over into the rest of the euro zone. The IMF’s new managing director, Christine Lagarde, the former French finance minister who helped to negotiate financing for Greece, said the sovereign debt crisis was her top priority and the board would consider the loan Friday.

Paulo Nogueira Batista, the IMF representative for Brazil and eight other South American and Caribbean countries, said that although he voted to approve the package last year, “Our chair was very skeptical about the sustainability of the program from the very beginning,” he said in an interview.

“We expressed serious concerns since the first meeting about Greece,” he said, adding, “That’s intensified… it’s only gotten worse.”

He’s not alone. Arvind Virmani, IMF board member for India and three other South Asian nations, believes Greece, among “European countries with severe fiscal problems,” is insolvent, basically unable to pay back its debt obligations. In a June policy paper he says was written representing his personal views and not those in his official capacity, Virmani said, “Unless we solve the solvency problem per se, conventional Breton Woods programs will only postpone the day of reckoning.”

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