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15th Aug 2020

Greece's creditors differ on bailout details

  • IMF chief Christine Lagarde (l) and EU Commission president Jean-Claude Juncker (r). The IMF thinks that the numbers are "too soft". (Photo: Consillium)

Eurozone finance ministers are due to meet Wednesday evening (24 June) to try and reach a deal on Greece’s bailout but the creditors themselves are divided and there are worries about final parliamentary approval

The creditor institutions - the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB) - are assessing a Greek proposal sent on Sunday (21 June) and discussing detailed figures and specific measures with Greek experts.

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But last minute cracks have appeared between the EU institutions and the IMF over the measures Athens should take to release €7.2bn in bailout money.

The IMF "thinks that the numbers are too soft," an EU source said, referring to the fiscal targets, pensions and VAT levels under discussion.

While EU institutions and member states agree that the latest Greek proposal is in line with the so-called "aide-memoire" drawn up by the creditors at a meeting in Berlin on 1 June, the IMF is said to now demand targets closer to a ‘memorandum of understanding’ signed with Greece in 2012.

"The aide-memoire and the Greek proposal take into account the reality of the current situation," the source said, suggesting the IMF is sticking to out of touch older demands.

With the latest Greek proposal, the source said, "we've gone a lot further than anyone would have hoped a few weeks ago. We have to recognise Greece's serious effort".

"Patience is now appropriate," a diplomatic source told EUobserver to downplay divergences.

"The institutions need to sit around a table and work out an agreement" in time for the Eurogroup on Wesnesday, the source said.

Meanwhile questions arise about how a possible agreement later this week could be endorsed by various national parliaments. Greece's current bailout runs out on 30 June, and it also needs to pay an IMF bill by then.

At least four EU countries - Germany, Finland and Estonia - are required to vote to validate a deal, while the Dutch Parliament will at least hold a debate and maybe a vote.

In any of these four countries, an agreement considered too favorable to Greece could fail to get the green light.

But the Greek parliament itself has to make the first endorsement move – and that is not a given.

"I believe that this programme as we see it is difficult to pass by us," deputy speaker Alexis Mitropolous, a representative of Syriza's radical wing, told Greek TV on Tuesday, raising questions about Prime Minister Alexis Tsipras’ ability to convince his majority

A vote by the Vouli, the Greek Parliament, would be necessary to trigger the disbursement of a €7.2 billion loan. And it could also be necessary to guarantee a positive vote in other countries.

"It is important to have an agreement, but implementing it is also equally important," the diplomatic source said.

Some countries "are sceptical about the already delayed implementation of an overlong programme", and would not validate the agreement before Greece takes so-called "prior action".

These prior actions could be a vote, or at least decrees, to implement measures included in the agreement, such as pension or VAT reform.

According to Bloomberg, the German finance ministry has told euro area officials that Bundestag members could invoke a fast-track procedure but this is likely to depend on the “quality and persuasive power” of an agreement with Greece.

If an agreement is reached on Wednesday or Thursday, a Greek official said, the Vouli could be asked to vote before the end of the week, so as to allow other parliaments to vote on the agreement in emergency procedures as soon as possible.

EU leaders, for their part, will also have their say on Greece when they meet for a summit in Brussels on Thursday and Friday.

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