IMF chief checks rumors

Lagarde tells Schaeuble Fund aims to continue participation in Greek program

In an apparent bid to put a stop to speculation about the International Monetary Fund withdrawing conclusively from Greece’s rescue program, the head of the Fund, Christine Lagarde, told German Finance Minister Wolfgang Schaeuble that the IMF planned to continue its participation.

“Mrs Lagarde again reassured the finance minister that the IMF is participating constructively in the ongoing discussions and continues to work for a quick agreement on full participation in the rescue program, including funds from the IMF,” Lagarde’s spokesman said following the talks between the IMF chief and Schaeuble at the World Economic Forum in Davos.

The comment came after Schaeuble turned up the heat on the Greek government, warning in an interview that if Athens and its creditors conclude the second review of Greece’s bailout without the participation of the IMF then it will be highly unlikely that the German parliament will approve another program to replace the current one. In comments to Bloomberg, Schaeuble said the Greek program was from “its beginning in 2010 based on the participation of the IMF” and that refusal of the Fund to join the third bailout would be a sign that the Greeks are not fulfilling their commitments and would not convince German MPs who face elections this fall.

There had been no official comment from the Greek government on the statements of either Schaeuble or Lagarde by late last night, pointing to a shift in tactics from earlier this month, when governing officials had crossed swords with German officials over the IMF’s role and the need for further austerity.

Now, following Schaeuble’s strong-arm tactics, it appears the government will have little choice but to legislate some of the measures that the IMF is demanding – such as the lowering of the tax-free threshold and further changes to the ongoing reform of the pension system.

More details about the IMF’s conditions for involvement are expected to emerge in a report due to be published this week. Leaked extracts from the draft called for further reductions in pensions and an abolition of tax breaks.

Greek officials hope to convince representatives of the country’s creditors to resume a stalled review at a Eurogroup meeting on January 26.