IMF Said to Move Toward Greek Bailout Loan in Merkel Boost

by Rainer Buergin  and Birgit Jennen
10 March 2017, 5:46 μ.μ.

The International Monetary Fund is moving toward rejoining Greece’s bailout, according to people familiar with the discussions, suggesting it will meet a condition set by Germany and other euro-area nations for continued aid.

In a shift that may help break the impasse over its participation, the IMF is ready to offer Greece a smaller loan than the last one provided five years ago, two people said, making it easier for the fund to justify its involvement to its shareholder countries. The amount under discussion is $3 billion to $6 billion, one of the people said, compared with a 29 billion-euro ($31 billion) IMF credit line under Greece’s second bailout in 2012.



For German Chancellor Angela Merkel, getting the IMF on board would clear a political obstacle as she campaigns for re-election in September. Merkel and IMF Managing Direct Christine Lagarde discussed debt relief for Greece in general terms during a meeting in Berlin in February, one of the people said. Afterward, Lagarde said Greek concessions on economic reforms made her “much more confident” that the IMF would join the bailout.

“There has been progress in some areas" on Greece, IMF spokesman Gerry Rice told reporters in Washington on Thursday. Differences remain and it’s too early to speculate on when an agreement on a new loan may be reached, he said.

Rice said he wasn’t aware of any discussions at the IMF executive board on the financial specifics of a new loan for Greece.

In a separate statement Thursday, Rice said “important progress” has been made on “a balanced fiscal package and a number of key reforms,” and that discussions will continue with Greek officials next week.

German Election

In a year of European elections, timing is politically important, particularly for Merkel. Having faced down critics of euro-area bailouts within her party bloc for years, she and Finance Minister Wolfgang Schaeuble can ill afford another fight. French Finance Minister Michel Sapin said last week it’s important for the credibility of Greece and its bailout program that the IMF remain involved.

German coalition lawmakers insisted on IMF participation when they backed Greece’s latest bailout in 2015. Schaeuble says any deviation would constitute a new aid program, potentially requiring a Bundestag vote in an election year on further aid to Greece.

Talks on a new IMF program for Greece could take place as early as April 21-23, when the fund’s member governments hold their spring meetings in Washington, potentially setting the stage for a vote by the IMF’s board after the meetings, one of the people said.

That scenario depends on Greece successfully completing the latest review by European and IMF bailout auditors of Prime Minister Alexis Tsipras’s progress on reforms required under the program. They include a further cut in pensions and an easing of labor-market rules that his government is resisting.

Debt Relief

Greece’s European creditors would also have to make a clear commitment to a debt-relief plan before the IMF would contribute to the 86 billion-euro ($90.5 billion) rescue program.

Tsipras’s government and bailout auditors made “important progress,” including on reforms of the financial sector, during the latest talks this week, the European Central Bank and the European Stability Mechanism rescue fund said in a statement Thursday. Greece is confident that a draft deal with creditors will be agreed before euro-area finance ministers meet on March 20, Tsipras said Friday.