Is this the sick joke of the Century?
Athens accepts fund will have a role in its new rescue deal but lender continues to call for substantial debt relief
Greece has backed down over having the International Monetary Fund involved its new bail-out deal, after months of tension between Athens and its senior creditor.
Greek finance minister Euclid Tsakalotos said his government was now committed to keeping the IMF on board, after his prime minister had attacked the institution for its “unconstructive” attitude during bail-out negotiations.
“The involvement of the IMF is agreed,” Mr Tsakalotos told Germany’sHandelsblatt. “This is our commitment.”
The concession came as eurozone finance ministers met in Brussels to discuss the government’s progress on implementing vital pensions reforms.
But the IMF remained cool over the prospect of providing more financial aid to Greece, insisting its support was still conditional on the EU granting Greece substantial debt relief.
“In addition to a comprehensive policy package, Greece also requires debt relief from European partners,” said IMF spokesman Gerry Rice on Thursday.
Reforms and debt relief were both “critical components” to secure IMF support, said Mr Rice. “The conclusion of discussions with us will depend on progress on both of these fronts,” he said.
Greek prime minister Alexis Tsipras had called for the IMF to stay out of the country’s bail-out last month.
But European creditors, led by Germany, have insisted on the IMF’s technical and financial support in a three-year rescue deal, agreed last August.
Mr Tsakalotos said the lender would now have an “active involvement” in the country’s financial future.
Athens has grown frustrated with the IMF’s insistence on deep pensions cuts as its price for involvement in the new rescue package.
The IMF repeated this demand on Thursday, saying Greece’s pensions spending – which stands around 10pc of GDP – is “unsustainable” and would need to be slashed in order to meet its “ambitious fiscal targets”.
Pension reform has proven to be one of the most intractable issues between the two sides, with creditors demanding Greece cut its pensions bill by €1.8bn a year.
Creditors are still evaluating Athens’ draft reforms, which aim to reduce the bulk of the pensions outlay by increasing employer contributions, rather than slashing provisions.
The IMF said it would seek to play a “constructive” part in the Greek programme if EU creditors reduced the country’s debt burden, which stands at 200pc of GDP.
“The nature of the role will depend on the discussions with our partners and the Greeks in the coming days,” said Mr Rice.
Jeroen Dijsselbloem, head of the eurogroup of finance ministers, said Greece could not “backtrack” on the issue of IMF involvement as it was a key demand made by eurozone member states.
The IMF has held a “senior creditor” status during five years of Greek bail-outs meaning repayment of its loans stand above the EU.
“There is an agreement and that agreement is that the IMF remains involved. And that is respected by the Greek government.”