Greece Bailout: IMF Criticizes EU Creditors over Bailout Terms

The International Monetary Fund (IMF) has attacked the EU over the terms of a bailout offered to Greece.

The IMF said Greece’s public debt was now “highly unsustainable” and urged debt relief on a scale “well beyond what has been under consideration to date”.

On July 14, the IMF made public advice it had given to the Eurogroup of finance ministers at the weekend.

That advice included proposals that would see some of Greece’s enormous debt written off.

The IMF study said EU countries would have to give Greece 30-years to repay all its European debt, including new loans, and a dramatic extension on the maturity of its debts. Without such extensions creditors might have to accept “deep upfront haircuts” on existing loans, the IMF added.

The split between the IMF and Greece’s European creditors over how best to deal with the country’s debt crisis has been hinted at before, but this is the first time such a disagreement has been made public.

One senior IMF official said the fund would only participate in a third bailout for Greece if EU creditors produce “a clear plan”.

The current deal “is by no means a comprehensive, detailed agreement”, the official said.

Under the new bailout terms, eurozone governments will contribute between €40 billion and €50 billion to Greece’s new three-year bailout, the IMF is expected to contribute another major chunk and the rest will come from selling off state assets and the financial markets.

The split between the IMF and the EU comes just hours before the Greek parliament is due to vote on a raft of economic reforms demanded of the Eurogroup over the weekend as a condition of a third Greek bailout.

The measures – which face resistance from PM Alexis Tsipras’ own lawmakers – include taxation increases and pension curbs.

Greece owes about 10% of its debt to the IMF.

It has missed two deadlines for repayment to the fund and is the first EU country ever to do so.

The IMF also said it regarded forecast rates of growth for Greece as unrealistically high.

Its analysis, released on July 14, pointed to Greek government debt reaching a peak of close to 200% of GDP or national income – over the next two years, which it called “highly unsustainable”.

On July 14, Alexis Tsipras said in an interview on state television that he did not believe in the bailout offered but was willing to implement it to “avoid disaster for the country” and the collapse of the banks.

The conditional agreement to receive up to €86 billion ($95 billion) from the EU over three years depends on further economic reforms – including the labor markets, banks and privatization – being passed after July 15.

Hard-liners in Alexis Tsipras’ own Syriza party are likely to rebel and the junior coalition party, the Independent Greeks, have offered only limited support for the reforms

Meanwhile, unions and trade associations representing those including civil servants, municipal workers and pharmacy owners have called or extended strikes to coincide with Wednesday’s parliamentary votes.

Greece also faces an immediate cash crisis. Banks have been shut since June 29.

Alexis Tsipras warned banks are unlikely to reopen until the bailout deal is ratified, and this could take another month.

A suggestion of providing Greece with emergency funding under the EU-wide European Financial Stability Mechanism has been opposed by Britain, which is not part of the euro but is an EU member.