German Finance Minister Wolfgang Schaeuble on Thursday reiterated his position that Germany would not support a new bailout program for Greece without the participation of the International Monetary Fund.
Schaeuble spoke to Bloomberg during the World Economic Forum in Davos, saying that his country sticks to the ground rules regarding financial aid to Greece.
“The Greek program is based from the very beginning in 2010 on the participation of the IMF,” Schaeuble said. However, he said, the fact that the Fund is reluctant to join is an indication that Greece is not fulfilling its obligations. And if the IMF refuses to join, “the program will be ended because the precondition of the program, the basis, is destroyed.”
Schaeuble said that a new bailout program will have to be negotiated if IMF pulls out of the Greek bailout. That would require the approval of the German Parliament.
“I would not give the advice that we should try to get the permission of German parliament,” he told Bloomberg. German lawmakers would say that if Greek authorities “are not able, with all the flexibility granted by European institutions, to stick to what they have approved, the precondition for a program is no longer” there.
However, there is a disagreement between European creditors and the IMF regarding Greece’s fiscal targets. The IMF believes the targets are too high and further austerity would hinder growth. Greece needs a “radical restructuring” of its public sector to achieve a modest primary surplus and reach its long-term growth targets, IMF chief economist Maurice Obstfeld and European department chief Poul Thomsen said in a blog post.
Furthermore, the Greek government considers that the IMF suggestions, such as an overhaul of the public sector and pension system, are too demanding and wants the Fund out of the program.
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