The International Monetary Fund approves in principle participation in Greek program without financing, the Fund’s spokesman Gerry Rice said on Thursday.
According to the Greek correspondents in Washington, “the IMF present approval of Greek program without financing until debt easing has been granted as a way of putting pressure on Europe to do so.”
The IMF has offered the possibility of approving a new aid program for Greece, but without releasing any funds until new debt relief steps are offered by Europe.
“Our understanding is that the European partners could go ahead with a disbursement in this situation,” spokesman Gerry Rice told reporters of the compromise plan.
While the IMF is pushing to have an agreement at next week’s Eurogroup meeting that includes an outline for debt relief as the “first best solution,” Rice said the compromise option would “help catalyze financing and debt relief,” and would “avoid a destabilizing situation in July.”
However, he stressed that the IMF would still insist “on debt relief before releasing any of its funds. It is not in any way a backing down.”
“We’re hoping there can be an agreement next week. We’re making good progress, the differences are narrowing,” he said.
The notion was first floated in a recent meeting of Eurogroup finance ministers, and then offered publicly on Monday by IMF Managing Director Christine Lagarde.
In an exclusive interview with German economic newspaper Handelsblatt, Christine Lagarde said on Monday, “the IMF is willing to participate in a Greek bailout and give European creditors more time to settle an ongoing dispute over debt relief.”
According to media, it seemed a softening of the fund’s position, as it has insisted repeatedly that Greece’s debt is not sustainable and would require significant debt relief.
But Rice said, “This is not breach guidelines or bending or breaking rules. I want to push back against that notion.”
The fund has used this type of “approval in principle” without immediate disbursement of funds in 19 cases previously, and would simply revive a tactic used previously, albeit not since the 1980s, Rice said.
Responding to a question, Rice said that “in some cases during 80’s the IMF had set deadline for the debt relief and in some other cases did not.”
Using this tactic is better for Greece than having the IMF remain on the sidelines, which could result in an aid program from Europe that does not include much-needed debt relief, AFP notes.
Rice said that IMF Managing Director, Christine Lagarde will participate in the Eurogroup in Luxembourg on June 15 2017.
PS Where exactly we stand now at this water drop torture?