Greece’s eurozone creditors and the International Monetary Fund are trying to find a last-minute solution to the country’s debt mountain so that the IMF contributes financially to the third bailout program.
The Greek rescue program ends on Aug. 20 and the IMF has asked for more relief measures which would make the country’s debt sustainable. European institutions, however, are undecided whether further debt easing measures are needed.
According to Reuters, eurozone officials and the IMF will discuss the issue on the sidelines of a G7 finance ministers’ and central bankers’ meeting in Canada next month.
“This thing has to be done now,” one senior official involved in the talks told Reuters. If there is no agreement by next Monday, the official said, the IMF would most likely not take part in Greece’s bailout at all.
Even though the Washington-based IMF participated in Greece’s first two bailout programs, it has refused to join in the third, which began in 2015. The IMF insists that Athens’ debt is not sustainable and the fund’s participation in the third bailout program has only been on an advisory level.
The eurozone countries — and more importantly Germany, Greece’s biggest creditor — want the participation of the IMF because that would make private investors feel more secure about lending to Athens again.
At the same time Berlin disagrees with the IMF’s view that Greece needs substantial debt relief. Germany argues that if Athens keeps its primary surplus high for a long period of time, it might not be needed at all.
The IMF is more pessimistic about Greece’s ability to keep high primary surpluses for decades, as a long time is needed to pay off its debts.
To make sure that Athens starts implementing necessary reforms after it gets the debt deal, the eurozone also wants a clause in the agreement that it would be null and void unless Greece keeps its primary surplus at 3.5 percent of GDP until at least 2022.
According to Reuters, this is a condition the IMF is ready to accept.