Σάββατο, 21 Μαΐου 2016

Greece’s creditors eye IMF debt deal


20/5/2016

By Alex Barker and Shawn Donnan

EU buyout of €14bn in loans discussed

Greece’s international creditors are discussing a plan to drastically scale back the International Monetary Fund’s exposure to the country, potentially through an EU buyout of up to €14bn in IMF bailout loans.

The rough compromise deal on debt relief, sketched out on the sidelines of G7 finance ministers meeting in Japan, would also front-load some concessions to Athens before 2018 in an attempt to end a protracted IMF-Germany stand-off over the €86bn bailout.

More contentious debt relief options, such as payment or financing targets, would be spelt out but still subject to decisions in 2018 or beyond, when Greece’s bailout programme ends and Germany is on the other side of federal elections next year.

Berlin’s dogged resistance to IMF’s demands for deep, upfront debt relief badly held up around €10bn of much needed loans, which Athens needs by July at the latest. Ministers and officials meeting on Friday, however, expressed more optimism, saying all sides decided to push for a deal on Tuesday in Brussels that could be endorsed by the IMF.

“There has been some movement on both sides,” Jeroen Dijsselbloem, the Dutch chair of the eurogroup of finance ministers, told CNBC. “Those people who said we need major debt relief upfront have moderated their stance and those people who said nothing is maybe needed in the future have also shifted a little. That is closing the gap.”

Options for upfront short-term relief before 2018 include giving Athens €1.9bn of profits from Greek bonds held by the ECB. The European Stability Mechanism, the eurozone’s bailout fund, could also use €19.6bn it has leftover from a bank rescue to buy out old loans to Greece. These include bilateral eurozone loans made in 2010/11 or relatively expensive IMF loans, which have interest rates up to four times higher than the ESM.

While an IMF buyout could be done before 2018, Wolfgang Schäuble, Germany’s finance minister, remains extremely wary of measures that would require Bundestag approval, even if it does not increase the ESM programme for Greece.

One eurozone official said Mr Schäuble hinted that the IMF buyout option, if pursued, would need the IMF to firmly pledge on Tuesday to fully participate in the Greek bailout’s next phase, a crucial issue for some Bundestag lawmakers. Another official at the meeting said Mr Schäuble was adamant, saying it would be “stupid” to delay or fudge IMF involvement.

The IMF has to meet its own tough debt rules in order to take part financially in the current Greek bailout and faces a sceptical membership. Many non-European members of the fund are fed up with what they see as its special treatment of Greece and other Eurozone countries in recent years.

Christine Lagarde, the IMF’s managing director, has also been very publicly calling for more than a year for Greece’s European creditors to grant it meaningful debt relief.

In an initial proposal sent to European leaders earlier this month the IMF suggested the suspension of any Greek payments to its main European creditors until 2040, or far beyond the current 2022 moratorium. It also suggested extending the maturities of some Greek bonds until 2080 and fixing the interest rate on all its debts at 1.5 per cent, far below market rates.

The Fund wants all of the debt relief locked in by the time Greece’s latest bailout expires in 2018 to avoid any future political wrangling by reluctant European creditors such as Germany.

Speaking after the meeting in Sendai, Mr Dijsselbloem said his preference was to lay out “quite clear choices about the measures we are prepared to take and see when they are needed”.

He added he agreed with Mr Schauble’s argument that we “see what is needed” after the programme ends. “We don’t know what is needed in the future. We can estimate it but we don’t know for sure,” he added.

Officials familiar with the Friday meeting said Ms Lagarde showed some flexibility. Even in its proposal the IMF suggested that while “upfront” agreement on the debt relief package was necessary, it could include measures contingent on Athens delivering on reforms as promised by 2018. It also suggested creating an “automatic mechanism” that would go into place after the program expires that would link additional debt relief to other economic triggers such as GDP.

The US has also been applying pressure on both sides in the negotiations. During meetings on the sidelines of the G7 in Japan on Friday US Treasury Secretary Jack Lew pushed both Mr Dijsselbloem and French finance minister Michel Sapin to offer Greece “meaningful debt relief”.

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