Last chance for debt agreement
Greece’s creditors convene in Canada this morning to try to bridge the gap between Berlin and the IMF
The mission chiefs of Greece’s creditors and the finance ministers of France, Germany and Italy will meet this morning with the aim of finding a way out of the impasse in talks between Berlin and the International Monetary Fund regarding Greek debt relief.
During breakfast on the sidelines of the G7 meeting in Canada the leading figures of the Greek program might just provide a final answer in terms of easing Greece’s national debt. This decision will also determine the IMF’s participation in a mini-program for Greece lasting up to August 20 with funding.
Expectations of such an agreement have been dampened given that German Chancellor Angela Merkel’s party does not appear to consider the Fund’s participation as necessary as it did in the past.
Eckhardt Rehberg, the spokesman of the CDU/CSU parliamentary group for budgetary policy, told the Finance Times yesterday that as the IMF is pressing for a major lightening of the debt there is the question of whether the price of the Fund’s participation in the program is too high. This opinion in the CDU/CSU parliamentary party, which used to be the main advocate of IMF participation in the program, might actually contribute to this morning’s discussion.
“It’s a question of whether the IMF must remain on board with a contribution of only 1.6 billion euros when the current 86-billion-euro program will not be used up by August,” stated Rehberg.
To date German Finance Minister Olaf Scholz has been trying to resolve a very difficult problem: He has been trying to find a way to allow the full participation of the IMF in the program, as the German parliament demands it issue its approval for the last disbursement, while avoiding debt relief that would be prohibitive for German lawmakers to approve.
The Fund is insisting on its positions that are a far cry from those of Berlin, considering that the debt lightening will have to be considerable to render the debt sustainable. It is calling for the extension of the payments of the second program’s loans by 10 to 15 years at least, while Germany would prefer the extension to be nearer to five years.