Greece's international lenders assured investors this week that they would not abandon Athens at the end of a 3-year bailout plan if it fulfilled tough reforms but failed to regain market trust, a source told Reuters on Sunday. The EU and the IMF saved Greece from bankruptcy in May by granting it a three-year bailout worth 110 billion euros in return for tough austerity cuts.
EU, IMF and ECB officials accompanied Finance Minister George Papaconstantinou on a two-day roadshow in London, Paris and Frankfurt this week to meet investors and persuade them of Greece's commitment to meet debt reduction targets.
A source close to the roadshow said that when asked what would happen after 3 years if Greece fully met EU/IMF demands to slash its deficit but failed to convince markets, the international officials told investors: "In that situation we would not walk away from Greece, we would not abandon them."
Leaks about the roadshow have prompted the Greek press to speculate over a possible extension of the support program. BNP Paribas wrote in a note that the international officials had suggested during a presentation in London that this was a possibility if Athens met the terms of the bailout.
The source close to the roadshow said the officials did not mention any extension of the program or any new program.
"We believe Greece will meet the targets and the markets will be convinced, but if markets were to remain unconvinced ... we would have to see what would be the proper solution," the source quoted officials as telling investors.
Liberal newspaper Ta Nea wrote this weekend, without naming sources, that the European Commission was examining the possibility of extending the support program until 2020 because of concerns that markets may still not be willing to lend to Greece at reasonable rates even if it enacts the required reforms.
The spread between Greece's 10-year government bonds and benchmark German Bund stood at over 900 basis points on Friday, near the peak seen during the height of the eurozone sovereign debt crisis in early May.
Under the terms of the bailout Greece must narrow its budget shortfall from 13.6 percent of gross domestic product last year to 8.1 percent this year, 4.9 percent in 2013 and 2.6 percent in 2014. An IMF spokesperson said on Friday: "As the recent review confirmed, the current program is on track. Our expectation is that Greece would return to the markets over the next 12-18 months and that further support would not be needed."