The International Monetary Fund (IMF) said Tuesday that it would consider extending the terms on existing Greek loans to give Athens more time to avoid default through restructuring. But earlier warnings by rating agencies that such a move might constitute default anyway continued to reverberate.
Reuters reported that the IMF is considering allowing Greece to take more time to repay its international loans, so that restructuring could be avoided. The effects of a restructuring would cause tumult throughout the euro zone, according to Bob Traa, the IMF's senior representative in Greece, who was quoted in the report. Such a move might not be accepted by ratings services, and instead could be classified as a default if they believe that bondholders feel coerced into granting more time to the beleaguered country to extricate itself from staggering debt.
European Union (EU) officials are floating the idea of a Vienna Initiative-style voluntary rollover. In that initiative, in 2009, credit lines to Eastern European subsidiary banks in Romania, Serbia, Latvia and Estonia were held open by parent banks who agreed to the arrangement.
However, Fitch Ratings and Moody's Investors Service both said that if bondholders participated in a similar arrangement with Greece because they feared the consequences, not because they were truly willing, the arrangement would nonetheless be classified as a default. Such a classification could send markets tumbling and cause other weak euro zone countries to be further downgraded; these effects would defeat the purpose of allowing Greece to roll over its debt.
