Greece Points Finger at the IMF for Holding Up Bailout Review

  • Greek finance chief says Washington-based lender is isolated
  • Tsakalotos says he's `aghast' at delay in more aid payouts

Greece accused the International Monetary Fund of unreasonably delaying the disbursement of more aid to the country, saying the stance risks derailing the Greek economy.

Finance Minister Euclid Tsakalotos said the IMF disagrees with Greece’s other international creditors on budget measures needed for more funds to be released under an 86 billion-euro ($93 billion) rescue approved seven months ago. He said the IMF is pressing for extra fiscal cuts to ensure Greece reaches a 3.5 percent budget surplus excluding interest payments in 2018.

Greece and its creditors are locked in negotiations on how the nation can close its fiscal gap, in line with the requirements of the aid program agreed with the European Commission, the European Central Bank and the IMF. Failure to strike a deal would hold up the release of the next portion of bailout funding, adding to Greek troubles as a massive influx of refugees threatens to strand thousands of migrants in the nation and cause a humanitarian crisis.

“We really find it very difficult to understand why we should be asked to do more measures in this situation, which would be politically difficult and -- perhaps even more importantly -- economically counterproductive,” Tsakalotos told a European Parliament committee on Wednesday in Brussels.

Pension Cuts

The government of Prime Minister Alexis Tsipras objects to the IMF’s position because the economic situation is better than what was projected when the country won the bailout, according to Tsakalotos. He said the government is “very close” to the calculations of the European institutions overseeing the aid program.

The comments shed light on the strains among creditors that have lurked behind each of Greece’s three international bailouts since 2010, with the IMF tending to be tougher than European monitors on fiscal targets and the need for sustainable public debt.

The IMF joined the first rescue of Greece six years ago at the insistence primarily of Germany, which for political and legal reasons was keen to internationalize the management of the Greek financial crisis, and over the objections of the heads at the time of the ECB and the group of euro-area finance ministers.

Tsakalotos said on Wednesday that the IMF’s stance on Greek fiscal measures has led to complications in negotiations with creditors about whether the government should deepen pension cuts -- another matter that is politically sensitive in the country.

Economic Recovery

“It is because the IMF thinks that we need to do more that it’s saying we should cut current pensions,” he said.

Tsakalotos said Greece and its creditors have an interest in speedily concluding the current review because doing so would lead to stronger investment and economic activity in the country, whose economy contracted in 2015 after emerging in 2014 from a six-year recession.

Bank of Greece Governor Yannis Stournaras said last month that any delay in the completion of the bailout review would weigh on the country’s economic recovery prospects. Greece’s economy shrank by 0.3 percent last year, according to the Hellenic Statistical Authority. The commission estimates a 0.7 percent contraction in 2016.

“We haven’t got endless time,” Tsakalotos said on Wednesday, adding that he was “aghast” at how long the review is taking to wrap up.

Before it's here, it's on the Bloomberg Terminal.