Angela Merkel’s conservatives no longer insist that the IMF continues to participate in Greece’s bailout programme, in a decisive change that reflects anxiety about the fund’s calls for debt relief for Athens.
Eckhardt Rehberg, spokesman of the CDU/CSU parliamentary group for budgetary policy, told the Financial Times that “with the IMF insisting on large-scale debt relief for Greece — they have been talking about a three-digit number — I have a problem.
”“The question is: Is the price of IMF participation in the next programme too high?” he said.
The shift in the German position, at least in the influential CDU/CSU parliamentary group, could help ease talks between eurozone governments and the IMF on the sidelines of the G7 meeting in Canada this weekend.
Christine Lagarde, IMF managing director, will be attending the meeting, which will also bring together the finance ministers of Germany and France.
Although the Greek economy returned to modest growth in the past year, the country still languishes under the burden of the €248bn it owes to the eurozone and the IMF.
The fund had agreed in principle to provide Greece with a small credit line of €1.6bn, but it wanted eurozone governments to provide more clarity on debt relief before it made a financial commitment. However, Germany and its northern European allies resisted such demands, fearing their taxpayers would lose out.
“It’s a question of whether the IMF must remain on board with a contribution of only €1.6bn when the current €86bn programme will not be used up by August?” Mr Rehberg said. “It’s a trade-off.”
The German finance ministry, however, continues to insist that IMF involvement is “indispensable”, three months ahead of Greece’s planned exit from the bailout this summer.
If a deal is not thrashed out at the G7 finance ministers’ meeting in Whistler, British Columbia, on Monday at the latest, IMF officials have warned that the fund will not have enough time to activate and then review its Greek programme. Hawkish eurozone capitals, including Berlin and The Hague, are open to the possibility of the IMF staying involved with Greece but without providing any money to the bailout.
Some officials are worried that market jitters triggered by Italy’s political crisis will hamper Greece’s ability to raise more debt once it exits the third bailout in August. That would make the IMF’s role even more crucial in convincing nervous investors that Greece can stay solvent.
German lawmakers have insisted on IMF participation in the Greek bailout since the country’s first rescue package in 2010. Wary of the European Commission’s role in administering bailouts, Wolfgang Schäuble, the former German finance minister, convinced sceptical German MPs that the IMF’s stamp of approval would lend credibility to a programme that involved billions in German taxpayers’ money.
Germany’s parliament agreed to back the current €86bn bailout, negotiated by EU leaders in 2015, on condition the IMF would continue its involvement.Part of the conflict between some eurozone members and the IMF is a difference of views on how sustainable Greece’s debt is, with Germany and other governments more optimistic about Greece’s growth prospects than the IMF.
“We don’t agree with the fund’s debt sustainability analysis,” Mr Rehberg said. “At the moment the IMF and the commission are quite far apart in terms of their growth assumptions for Greece.” He noted, however, that negotiations between the IMF and European institutions “are still going on”.