Greece denied IMF bailout package: what next?

31.07.2015 14:09
Greece denied IMF bailout package: what next?

YEREVAN, July 31. /ARKA/. The board of the International Monetary Fund decided Wednesday that Greece was disqualified for any IMF bailout given its high debt levels and poor reform record, reports referring to The Financial Times.

The IMF decided last week that its existing bailout program, which was originally to run until March, needed to be scrapped because it could no longer achieve its stated goal of helping Greece recover to the point where it could return to private debt markets.

The IMF then forced Athens to request a new IMF program, which requires board approval, necessitating Wednesday’s meeting.

Referring to “strictly confidential” summary of Wednesday’s board meeting, The Financial Times reports that IMF negotiators will take part in policy discussions to ensure the eurozone’s new bailout “is consistent with what the fund has in mind”.

But they “cannot reach staff-level agreement at this stage”. The fund will decide whether to take part only after Greece has “agreed on a comprehensive set of reforms” and, crucially, after eurozone bailout lenders have “agreed on debt relief”.

The determination, presented by IMF staff at a two-hour board meeting on Wednesday, means that while IMF staff will participate in bailout negotiations currently under way in Athens, the fund will not decide whether to agree a new program for months — potentially into next year.

That delay could have significant repercussions, particularly in Germany, where officials have long said it would be impossible to win Bundestag approval for the new €86bn bailout without the IMF on board.

According to The Financial Times, the IMF’s assessment adds another source of complexity, just as Athens and its bailout monitors begin discussions to try to conclude a deal before a tight August 20 deadline.

While the creditors harbour misgivings, Alexis Tsipras, Greece’s prime minister, is also facing a mutiny from leftwing members of his Syriza party unhappy with the conditions attached to the bailout.

That condition could prove a sticking point, since Berlin and other creditor governments have so far strongly resisted any suggestion of forgiving Greece’s debts.

According to the summary, Germany’s representative to the IMF board said Berlin “would have preferred the fund . . . move in parallel” with the eurozone bailout talks.

Instead, it now faces the prospect of trying to move an €86bn bailout through a sceptical Bundestag in a matter of weeks, without the IMF’s imprimatur.

Some Greek officials suspect the IMF and Wolfgang Schäuble, the hardline German finance minister, are determined to scupper a Greek rescue, despite the July agreement to move forward with a third bailout.
In a private teleconference made public this week, Yanis Varoufakis, the former Greek finance minister, said he feared that his government would pass new rounds of economic reforms only for the IMF to pull the plug on the programme later this year.
“According to its own rules, the IMF cannot participate in any new bailout. I mean, they’ve already violated their rules twice to do so, but I don’t think they will do it a third time,” Mr Varoufakis is quoted by The Financial Times. “Dr Schäuble and the IMF have a common interest: they don’t want this deal to go ahead.”

Senior EU officials have insisted that Christine Lagarde, the IMF managing director, signalled her willingness to participate in a new bailout at the high-stakes summit that agreed the new rescue earlier in July.

But Greece has become a growing source of rancour within the fund and among its shareholders. People who have spoken with senior IMF officials say Ms Lagarde is facing a unified staff view that the fund’s reputation is on the line and that it cannot agree to a new programme without significant changes. --0--


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