The IMF called on the European Union on Thursday to be more “realistic” about what Greece must due to obtain further aid under an EU bailout program agreed in July.
For several months, EU officials and the IMF have held difficult discussions on the measures Athens should take to improve the finances of the debt-ridden eurozone country, reeling from nearly six years of recession.
An informal meeting Wednesday in Brussels between representatives of the International Monetary Fund and the EU’s European Commission, the European Central Bank and the European Stability Mechanism made “good progress,” people on both sides said.
But the IMF, which has yet to decide whether to participate in the third bailout program for Greece since 2010, sounded its recurring theme Thursday on the question of the viability of the Greek economic program.
“We try to provide the realistic analysis… that’s our job to be realistic,” said IMF spokesman Gerry Rice said, in the face of accusations by Greek authorities that the Fund is blocking progress on unlocking funds from the EU bailout.
“Although we are very close to the positions of the three European institutions, the IMF is maintaining a very hard position” that is “incomprehensible,” Greek Finance Minister Euclid Tsakalotos said Thursday.
“It’s not right to characterize the IMF as tough or blocking,” Rice said at a media briefing in Washington.
At issue is how Greece can reach the budget targets set last July in exchange for 86 billion euros ($94.2 billion) in EU financial aid.
The targets, aimed at reaching a primary budget surplus of 3.5 percent of gross domestic product in two years, are “very ambitious” and, above all, “had never been quantified nor specified,” the IMF spokesman said.
The 188-nation IMF, champion of orthodox fiscal policies, does not want to alter those targets but the program “needs to add up” and allow Greece to reduce debt to sustainable levels, Rice said. Currently the debt load is nearly 180 percent of GDP.
– ‘More debt relief’ –
To get there, the IMF says the Greeks should accept new austerity measures — including further cuts to pensions — while the Europeans should give the country significant debt relief.
While the country has been wracked by protests over the pension cuts, the IMF spokesman suggested the adjustment could be less painful if European partners were more generous.
“It would be very difficult for a society that has been enduring a very painful adjustment in the last five years to meet that very ambitious fiscal target,” Rice said.
“The needed reforms would be less demanding if there was more debt relief on offer from Greece’s European partners.”
That issue is extremely sensitive in Europe. A number of the members of the 19-nation eurozone, Germany in the lead, agreed under pressure to accept the principle of lightening Greece’s debt burden. They are vehemently opposed to doing more.
On the European side, there were assurances Thursday that no one will let the IMF-EU conflict degenerate. “This will be wrapped up soon,” said an EU source under condition of anonymity.
Another European source, who also spoke on condition of anonymity, acknowledged “clearly a difference of views” remains. “The focus is on working these out,” the person said.
These differences have been holding up the first review of Greece’s performance under the EU loan program, which Brussels had targeted for completion by the end of 2015. The delay is frustrating Athens as it desperately awaits another loan installment.
“Negotiations on the reform plan have fallen behind, which is in nobody’s interest,” Greek Prime Minister Alexis Tsipras said in mid-February, citing “disagreements” among the institutions.
On Thursday, the IMF supported the Greek government’s call for completion of the first review.
“We share the authorities’ view that it should be completed as soon as possible,” Rice said, lobbing the ball back into the EU’s court.