The revelations come from Washington based journalist Michalis Ignatiou writing in the Greek newspaper ‘Ethnos’. According to the paper, in 2010 after the decision had been taken for Greece to be bailed out by the IMF and European institutions, the then head of the International Monetary Fund, Dominique Strauss-Kahn advised Mr Papandreou to demand a ‘haircut’ on Greece’s debt as soon as possible, saying that the IMF would support the request as it believed it to be the only way for Greece’s debt to become viable. However Mr Papandreou declined to do so with the result being that Greece was forced to borrow 110 billion euros to avoid default. Had the debt been reduced, Greece would have required a much smaller bailout.
According to confidential minutes from an IMF meeting dated May 10th 2010 published by the paper, Fund experts, in response to criticisms from members of the board over the potential failure of the programme if it was not accompanied by a ‘haircut’ of the debt, stated that “debt restructuring has been ruled out by the Greek authorities themselves.”
Mr Ignatiou writes that even after the MoU was signed in May 2010, Dominique Strauss-Kahn continued to pressure George Papandreou to request debt restructuring as soon as possible in order for that to happen no later than October 2010. However the Prime Minister, giving various excuses, refused to do so, a fact which greatly angered the IMF head, according to the journalist’s sources.
The Ethnos article also refers to a June 2013 report by the IMF over the handling of the Greek crisis according to which (page 49) “Greece itself and the European partners were opposed to a debt restructuring over concerns regarding the internal political cost, consequences for pension funds and contagion.”
On page 27 the same report writes, “at the outset of the programme, the (Greek) authorities ruled out a restructuring of the debt as a red herring.”
These documents appear to directly contradict statements made in response to the revelations by Mr Papandreou’s close aide, George Elenopoulos, claiming that, the Greek government had put forward the idea of a debt restructuring ‘from the outset.”
Furthermore, while European Commission and ECB opposition to an early restructuring of Greece’s debt are well documented, many critics of Mr Papandreou, including Mr Ignatiou ,claim that he failed to to use the leverage provided by fear over a Greek default and simply acceded to European demands. Eventually Greece’s debt was restructured in February 2012 via the PSI mechanism. Those who benefited from the delay, Mr Ignatiou writes, citing the 2013 IMF report, were private investors (mainly foreign banks) who had managed by that point to significantly reduce their exposure to Greek bonds. The big loser was the Greek state which instead of requiring 30 billion euros, ended up receiving 110 billion euros in loans.
In defense of Mr Papandreou, Mr Elenopoulos maintains that given that there was no agreement from European institutions over a Greek ‘haircut’ in 2010, had Greece unilaterally written off a part of its debt it would have meant a certain exit from the euro with catastrophic consequences for the country.