IMF shows Athens carrot and stick for debt relief

IMF shows Athens carrot and stick for debt relief

According to reports in the Greek press, the International Monetary Fund (IMF) is ready to commit to remaining a part of the Greek bailout program. However, its inclusion in the adjustment program will depend on certain conditions being met that reportedly concern the Greek government.

Greek Sunday newspaper, To Vima on Sunday, reported that the IMF will make three tough demands in order to continue in the Greek bailout deal: the abolition of the so called personal difference that allows existing pensions to remain higher than new pensions issued according to a recently legislated calculation formula; lowering the tax-free threshold and abolishing all tax breaks; increasing the limit of mass layoffs to 10 percent for large businesses.

It is estimated that the new measures will prove very difficult for the Syriza-ANEL coalition government to push through parliament as it will entail fresh pension cuts, higher taxation while also impacting significantly on labor rights.

According to analysts, Athens will have to contemplate whether or not the tough demands put forth by the IMF will be sufficiently counterbalanced by debt relief measures the IMF is pushing for and Greece’s European creditors are currently stalling on.

US President Barack Obama who is officially visiting Athens on 15 November said in interview with the Sunday edition of Kathimerini newspaper that Greece is in need of debt relief in order for the country to return to healthy economic growth.

“I will continue to urge Greece’s creditors to take the steps needed to ensure the country is well placed to return to robust economic growth, including by providing meaningful debt relief,” Obama said in the interview. “Getting that done would not only fuel the Greek economic recovery, it would show that Europe can make its economy work for everyone” he added.

Ahead of talks with creditors restarting this week over a review of progress in the implementation of the bailout agreement, the Tsipras administration will seek to deliver all prior actions in order to subsequently push for tangible debt relief with the support of the US Government and the IMF.

Greek debt relief and an agreement to reduce primary budget surplus targets after 2018 are seen by the IMF as two crucial prerequisites in order for it to rejoin the Greek program as a lender. It is reported that the Fund could provide approximately 6 billion euros in funds for Greece.

Prime minister Tsipras told cabinet members over the weekend that Athens “can and will” conclude its second bailout review in time for debt relief talks to begin in December. If that happens, Tsipras said, Greece can eye its inclusion in the European Central Bank’s quantitative easing scheme within the first quarter of 2017. It can then regain access to bond markets in 2018./IBNA