Friday

30th Sep 2022

EU and IMF in effort to unblock Greek bailout talks

  • Germany's Schaeuble (l), IMF's Lagarde (c) and Netherlands' Dijssoelbloem (r), with Ireland's Noonan. The EU and the IMF are still at odds on Greek debt. (Photo: Council of the EU)

Finance ministers from the main eurozone countries are expected to meet International Monetary Fund (IMF) negotiators on Friday (25 November) in an effort to reach an agreement on the Greek bailout early December.

The meeting, as reported by the Sueddeutsche Zeitung newspaper on Tuesday, will take place in Berlin and will involve ministers from Germany, France, Italy, Spain and Netherlands, IMF officials as well as officials from the European Commission and the European Central Bank (ECB).

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The aim of the talks will be to find a common position ahead of a Eurogroup meeting on 5 December when eurozone finance ministers aim to close the second review of the Greek bailout programme, in order to unblock a new tranche of aid to Athens.

Discussions on the review in Athens between Greece and experts from the creditor institutions were suspended on Monday and will continue at a technical level by teleconference. They are blocked on the issues of labour market reform and the fiscal targets for Greece.

Creditors in particular oppose Greek plans to reintroduce collective bargaining, a mechanism to set minimum wages and negotiate lay offs. They also diverge on the level of the budgetary surplus Greece should reach from 2018, or on the measures to be taken to reach it.

"Had it been the Europeans, we'd have had an agreement by now," a Greek government source said on Tuesday, pointing at divergences between European creditors and the IMF.

Europeans say that Greece can reach a 3.5 percent surplus from 2018 with the measures already agreed. The IMF says the target is too high, or that additional measures must be taken to reach it.

"Sometimes it gets too political," the source said, adding that he hoped Greece and its creditors would be able to conclude the review "quickly", in time for the 5 December Eurogroup meeting.

Early November, the European Commission vice-president for the euro, Valdis Dombrovskis, said Greece "was broadly on track" to meet the bailout requirements.

"The programme is working for the first time," the Greek official pointed out. "We would find it very strange if we had a deadlock."

He said "the problem would be to have delays again" and warned that they would jeopardise the country's stability and investors' trust.

Beyond the surplus discussions and the review, the main stake of the meeting will be to secure the IMF's participation to the programme after the end of the year.

The fund said it would stay on board if it considered Greek debt sustainable in the long term. It has called for debt relief measures.

The European institutions say Greek debt is sustainable, and under German pressure have so far refused to commit to long-term debt relief.

Friday's Berlin meeting is expected to bridge differences and lay the ground for the "complete package" required by the IMF: a second review that includes fiscal target and adequate measures so to ensure debt sustainability.

The meeting will be held without Greek representatives, but authorities in Athens insist that the onus is on the IMF and Germany.

"We didn't ask the IMF to be in the programme. It's up to them to decide whether they like it or not," the Greek source said, adding that it was "not our job to have a back-up plan" for the review.

"We're optimistic that everybody will stick to what has been agreed [in 2015]," he said.

"We understand internal political situations but we cannot wait for the next elections in Germany," he added, referring to Germany's opposition to debt relief.

EU and IMF agree debt relief for Greece

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EU growth is being held back by more than €1 trillion of bad loans, its banking regulator said, comparing the eurozone to 1990s Japan.

EU agrees on debt measures for Greece

Measures to reduce the cost of Greek debt will be implemented immediately, but eurozone finance ministers said more action will have to be taken for a new agreement on the bailout programme.

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As focus turns to negotiations between Greece and lenders over a new loan package, both the European Commission and the International Monetary Fund seem determined to press for further reforms, undermining trade unions, workers' rights, and collective bargaining agreements.

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