March 6, 2016 3:56
pm
EU,
IMF attempt to bridge increasingly bitter Greece bailout rift
Peter Spiegel in
Brussels and Guy Chazan in Berlin
Greece’s warring
creditors will attempt to bridge their differences at a meeting of
eurozone finance ministers Monday amidst mounting concerns Athens’
€86bn third bailout is already headed for crisis.
The EU and the
International Monetary Fund are at loggerheads over the strength of
reform measures Athens must adopt to complete the rescue’s first
quarterly review, which must be closed before the eurozone will
consider the politically combustible issue of granting Greece debt
relief.
Without the
acquiescence of the IMF, which has not formally signed onto the third
bailout yet, the entire rescue risks falling apart since a German-led
group of creditor countries have insisted they cannot approve EU
bailout funds without IMF participation.
“Will the IMF be
in or out?” asked one senior eurozone official involved in the
talks. “Many European governments insist that this is unthinkable
without the IMF – but the IMF is well aware that it is in the best
bargaining position one could wish to be in.”
Under the terms of
last year’s bailout agreement, Greece must adopt reform measures
that will produce a primary surplus of 3.5 per cent of economic
output by 2018. A country’s primary budget is its revenues and
expenses when debt payments are not counted.
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The dispute centres
on what Athens needs to do to get to the 3.5 per cent surplus, with
Brussels insisting Alexis Tsipras, the Greek prime minister, is
committed to implementing reforms that will hit the target, but the
IMF believes many of the measures agreed are vague and do not add up.
In recent weeks, the
standoff has turned increasingly nasty, with IMF and European
Commission officials trading accusations during last month’s
finance ministerial meeting in Brussels. More recently, IMF and Greek
representatives got into a heated exchange at a gathering of deputies
last week.
In an effort to
clear the air, senior officials from all three bailout monitors –
Poul Thomsen, head of the IMF’s Europe department; Benoit Coeuré,
the European Central Bank governor responsible for Brussels issues;
and Marco Buti, director of the EU commission’s economics
department – gathered in Brussels for a dinner Wednesday night at
which an agreement was reached to try to mend differences before
Monday’s meeting.
But officials said
the two sides remain far apart and the only solution may be to send
bailout negotiators back to Athens next week with an agreed list of
reforms – even if they cannot agree on whether the list will be
enough to reach the 3.5 per cent target.
Officials said the
two sides cannot even agree on how much must be done, with the EU
believing Athens will run a small surplus even without new reforms
and the IMF projecting a 1 per cent deficit. The IMF is also
insisting that sweeping debt relief is needed to enable Greece to
reach the 2018 target, something that is politically difficult in
Berlin.
The IMF has come
under intense pressure to relax its stance, including from the US and
UK, amidst fears the Greek programme could blow up at the same time
as Europe struggles with a massive refugee influx and Britain is in
the midst of an EU membership referendum.
But Greece does not
need bailout cash until July, when about €3.5bn in debt payments
come due, and the IMF has signalled it sees no urgency to reach a
deal – leading some officials to believe Mr Thomsen is eager to end
the IMF’s participation. “There’s growing fear in Europe that
the IMF’s hawkish stance is motivated by its desire to get out of
Greece or force a change in government,” said Mujtaba Rahman, head
of European analysis at the Eurasia Group risk consultancy.
That has turned the
focus on Berlin, where Chancellor Angela Merkel has been politically
weakened by the refugee crisis and has expressed sympathy with
Athens, which has become overwhelmed by the migrant influx –
leading some Greek officials believe she will pressure the IMF to
back down.
“Berlin is in a
fix,” said a senior eurozone official. “They would like to be
somewhat more flexible, but the [bailout] agreement has quite
explicit targets which are internalised by the Bundestag. And they do
not dare to revisit this.”
One senior member of
Germany’s governing coalition said even Wolfgang Schäuble, the
hawkish finance minister, believes Berlin needs Athens to help solve
the migrant crisis and is therefore averse to repeat last year’s
drama, where he promoted Greece’s exit from the eurozone.
At the same time, Ms
Merkel is reluctant to ease budget targets or grant sweeping debt
relief – both of which must be approved by an increasingly hostile
Bundestag – and the German coalition official said if the IMF holds
firm, “then we have a problem.”
Additional reporting
by Stefan Wagstyl in Berlin
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