In previous bailouts the IMF has been a tough taskmaster, demanding reforms and actions that Greece’s euro zone partners have not always been keen to push for.
The role of the IMF in the latest bailout, Greece’s third, is currently in question. The Washington-based fund says Greece’s debt is not sustainable and that it does not want to participate unless there is some debt relief.
On Wednesday, however, German Finance Minister Wolfgang Schaeuble, described IMF involvement in the program as “indispensable”.
Many reasons have been cited for why Berlin is so keen to get the IMF on board, including funding, the Fund’s experience in supervising reforms, and leveraging its credibility to convince skeptical German lawmakers to back the bailout package.
But it is not so much the money, sources said on Thursday, even though it would be welcome.
Explaining Germany’s eagerness to involve the IMF, a government source in Berlin said: “It is foremost about the expertise, the expertise in the supervision of the reform measures.”
Such expertise would lend credibility to the bailout plan. Without the IMF’s involvement, the European Commission – which has a responsibility to represent Greece along with other European Union countries – would be left to supervise Athens’ implementation of its reform measures.
The big catch is that while the IMF wants Athens to get debt relief, Berlin strictly opposes cutting Greek debt.
However, Schaeuble said earlier this week that steps could be taken to reassure the IMF on the debt sustainability issue and that he was sure the Fund would take part in the plan. [ID:nL5N10T15O]
He was echoed on Wednesday by Eurogroup Chairman Jeroen Dijsselbloem who said the compromise might be lower interest rates and longer repayment terms rather than a write-off.
The prospect of IMF involvement helped assuage the concerns of some conservative German lawmakers, who voted in favor of the third bailout on Wednesday despite a record rebellion among Chancellor Angela Merkel’s own conservatives that suggested she would struggle to return to parliament to seek any further aid for Athens. [ID:nL5N10U16E]
The IMF is only due to decide on whether to participate in the bailout in October, when Athens’ creditors hold a first review of progress under the new bailout.
VOLTE FACE
At the outbreak of the euro zone crisis, Schaeuble initially opposed IMF involvement in bailing out Greece before Merkel overruled him. He has since warmed to the idea.
One government source in Berlin said it was in the interests of Germany and other euro zone countries to get the IMF to help bear the burden of the bailout financing, but stressed that Berlin’s prime reason for wanting the Fund’s involvement was its expertise in overseeing reform implementation.
“That’s the top priority,” said the source, speaking on condition of anonymity.
Under the terms of its third bailout, which is worth 86 billion euros ($96.10 billion), Greece must deliver a batch of reforms, including an overhaul of its pension system, changes to trading practices, privatizations, and a review of labor rules. [ID:nL5N10L1WO]
($1 = 0.8949 euros)
