IMF 'will not join Greece bailout until debt concerns are addressed'

Update: July, 31/2015 - 11:29

WASHINGTON — The International Monetary Fund has said it would not join a new bailout programme for Greece until conditions for debt sustainability, including debt relief and economic reforms, are clearly assured.

"In order to ensure that medium-term sustainability, there is a need for difficult decisions on both sides... difficult decisions in Greece regarding reforms, and difficult decisions among Greece's European partners about debt relief," a senior IMF official said on Thursday.

Speaking to journalists, the official said the IMF can only support a financial rescue programme "that is comprehensive".

"One should not be under the illusion that one side of it can fix the problem," he said.

"What is clear is that it will be some time before the two sides are ready to take these decisions."

The statement came as representatives of Greece's official creditors – the IMF, European Commission, European Central Bank, and the European Stability Mechanism – began meetings in Athens to prepare the proposed new 86 billion euro (US$94 billion) bailout programme for the country.

In the preliminary deal mapped out between the parties on July 13, the EU insisted that the IMF be part of any new programme, after two IMF-backed rescue operations since 2010 failed to restore the country's economy.

No change in position

The IMF, though, conditioned its participation on the EU and Greece creating the conditions of debt "sustainability" – that Greece would be able to return to economic growth and service its huge debt, currently about 170 per cent the size of its economy.

The senior IMF official, speaking on condition of anonymity, reiterated that stance after a Financial Times report suggested the Fund was standing further back from a new rescue programme.

In an IMF executive board meeting that took place on Wednesday, IMF staff, according to the FT report, stressed that Athens needed more progress on reforms, and the country's European Union creditors needed more clear commitment on debt relief, before the Fund would be allowed under its own rules to join in.

But the official said on Thursday that it was already understood that detailed plans for debt relief would not come for some months under current arrangements, and so the IMF – though participating in the preparations – would not be able to commit to join in funding the new bailout until then.

"It is clear that it will take some time before the two sides are ready to take these decisions. It was made clear at the meeting of European leaders a few weeks ago that they were not ready to consider the debt operation before the fall," he said.

"And I think it's also clear from discussions from the Greek authorities that some of the necessary decisions regarding particular fiscal, structure reforms will only be taken in the coming months."

"Everybody understands that the IMF can only begin at that time when these decisions of these two sides are taken," he said, adding that "there is nothing new that we have decided".

An EU official echoed that view, telling AFP on Thursday that the IMF timetable is "very much in line with what was discussed at the (July 13) summit and compatible with the European agenda".

"What matters is to progress on the ground, and we're doing this – with the IMF," the official said.

The tough reforms demanded by creditors in return for the bailout have caused a rift within Greece's ruling Syriza party, prompting Prime Minister Alexis Tsipras to raise the prospect of early elections if anti-austerity hardliners continued to oppose the rescue package.

Late on Thursday, members of the party's central committee voted in favour of the premier's call to hold an emergency congress in September to determine the government's strategy and preserve unity within the party.

The move comes after more than 30 Syriza lawmakers earlier this month refused to support the reforms needed to proceed with the new three-year bailout, forcing Tsipras to rely on the backing of opposition MPs to get the measures through parliament. — AFP