The Greek government just got a huge referendum boost
EUROZONE-GREECE/NEGOTIATIONS REUTERS/Yves Herman/Files. Greek Prime Minister Alexis Tsipras.Greece's ruling Syriza party just got a huge boost in its campaign to get Greeks to reject the existing bailout proposals in Sunday's referendum.
The International Monetary Fund (IMF), one of Greece's three main creditors, acknowledged Thursday that Greece's debts needed to be restructured.
That's pretty much the key demand Greece has been making all along. Finance Minister Yanis Varoufakis told Bloomberg TV earlier Thursday that he would rather "cut his arm off" than sign a bailout deal that didn't include rehashing debts to make payment dates more realistic.
Prime Minister Alexis Tsipras and Syriza's major issue with bailout proposals so far has been that they effectively turn Greece into a zombie country, stumbling along the poverty line and existing solely to pay off its heavy debts.
The IMF acknowledges in its latest debt-sustainability report on Greece that things have deteriorated so badly over the past year that debts are "unsustainable" and the country can't cope with any debt repayments for at least three years, even if things start moving back in the right direction.
Greece's next payment — €3.5 billion (£2.5 billion, $3.89 billion) to the European Central Bank — is due July 20.
It also says Greece will probably need a debt "haircut" — writing off some of the money it owes.
Some of the IMF's proposals are even more radical. One idea is to give Greece a 20-year "grace period" during which it would not have to pay debts.
Greece's economy has been crippled by huge debt demands, shrinking 25% over the past five years, and the IMF says the country will need €50 billion (£35.5 billion, $55.5 billion) to survive over just the next three years.
All of this is a huge boost for Tsipras, who told Greeks in a TV address on Wednesday that the country's creditors needed to give the country "breathing space."
But even if the IMF backs a debt restructure and an easing of payments, it doesn't mean it will necessarily happen. The IMF will have to convince Greece's two other big creditors — the European Commission and the European Central Bank. These two parties have so far been stubborn.