Differences narrowing with Europe over Greek deal: IMF

‘Exploring all options’

WASHINGTON, May 25, Europe still needs to provide a debt relief plan for Greece before the IMF can agree to more financing, but the sides are “exploring all options” and differences are narrowing, an IMF official said Thursday.

“Everyone is optimistic that agreement can be reached and hopefully can be reached at the next Eurogroupmeting” in midJune, IMF spokesman Gerry Rice.

However, disagreements remain over Europe’s forecasts for growth and budget surpluses in Greece after 2022, and the fund is “looking for more realism in the assumptions,” Rice told reporters.

Agreement

Greece, the eurozone finance ministers and the IMF early this month announced an agreement on a package of reform measures including tax and pension reforms that has since been approved by the Greek parliament.

The deal was aimed at unlocking the next tranche of aid from Europe from the third, 86-billioneuro ($94 billion) bailout deal Greece and its creditors secured in July 2015.

Greece needs the funds to repay seven billion euros ($7.6 billion) in maturing loans in July, but Germany will not agree to release the loan unless the International Monetary Fund participates, and the fund will not participate unless there are more details on debt relief, even if the final structure is not revealed until years from now.

The sides failed to reach a debt agreement in the meeting in Brussels on Monday, and there is “no possibility of IMF participation” without assurances that Greece’s debt will be sustainable, Rice said.

He declined to say whether the discussions included an IMF proposal to approve a new loan program for Greece without releasing any funds until the specifics on debt relief until later in the year -something virtually unheard of in its aid programs.

That would take the discussion out of play in Germany’s election in September, where the public is hostile to more financial support for Athens.

However, Rice vehemently denied doing any political favors for Germany.

“There is no deal at this point, there is no agreement. We are exploring all options within our existing practices and rules,” he said, noting that the IMF lending depends on each country’s circumstances “but we try to be as flexible as we can.”

The forecasts for growth and the primary fiscal surplus are key to the debt discussions, he said, and Europe continues to forecast a surplus excluding debt payments of 3.5 percent of GDP, which the IMF believes is not sustainable and would impose undue hardship on the country.

Athens could better use its budget to fuel growth and “Greece cannot grow while maintaining such a high surplus,” Rice said.

“It does not help anyone to have assumptions that are overly optimistic.”