IMF agrees on loans for Greece
Euro zone Finance Ministers and the International Monetary Fund are likely to strike a compromise on Greece to unlock badly needed rescue cash.
After hours of talks in Luxembourg IMF chief Christine Lagarde and the eurozone’s 19 Finance Ministers precede a payout of 8.5 billion euros to avoid Athens defaulting in July and avert another summer of Greek crisis.
Christine suggested a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.
Payment of the latest tranche of Greece’s bailout, agreed in 2015, has been held up for months by a row over its needs for debt relief which has pitted bailout-weary Germany against the International Monetary Fund (IMF).
Euro group head Jeroen Dijsselbloem said, “I am pleased to announce we have achieved an agreement on all elements,” “I think this is a major step forward,” he added.
“Nobody can claim that this is the best solution. This is a second-best solution, but it’s not a bad solution,” said Lagarde, a former French finance minister.
In a breakthrough, Lagarde agreed in Luxembourg that the Washington-based IMF would join Greece’s massive bailout, but said any payouts depended on the euro zone coming up with a full debt relief plan.
The deal averts a repeat of the summer of 2015 when Greece spectacularly defaulted on an IMF loan, and allows Athens to meet seven billion euros of debt repayments due in July.
“We feel that after this Euro group there is much greater clarity for both the Greek people and the financial markets,” Greek Finance Minister Euclid Tsakalotos said after the talks. “There is now light at the end of the tunnel,” he said.
Greece’s parliament approved last Friday reforms demanded by the international lenders to conclude a long-stalled review of its bailout progress and qualify for more loans before July.
Euro zone officials said that if the expected compromise is reached, Greece could get between 7.4 and 8 billion euros from the euro zone bailout fund ESM to cover next month’s repayments.
The IMF’s decision to come on board was therefore a breakthrough. Lagarde said it would put $2 billion into the programme. Lagarde’s move is controversial, with critics accusing the Washington-based organization of bending its own rules to satisfy Berlin.
The IMF had insisted repeatedly that Greece’s debt is not sustainable, and that the country would require significant debt relief from Europe before the fund could approve a new loan programme.
Greece nearly crashed out of the euro in 2015 after a furious fight over the bailout deal, and says its fragile recovery has suffered from the most recent delay.
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