Stalemate continues: Athens wants quick deal for first review; IMF wants legislated contingency measures worth 2% of GDP

By Dimitris Hatzinikolas

Negotiations over the delayed first review of the Greek program (third bailout) between Athens and its institutional creditors this week reportedly focused on the legal preparation for a “contingency plan” of measures demanded by the latter, especially the IMF.

According to reports by “N”, obstacles towards an agreement are the now well-known conflicting positions of the IMF and influential German Finance Minister Wolfgang Schauble, with the former demanding debt relief for Greece in order to ensure that the debt-to-GDP ratio is sustainable – as the Fund’s charter demands in order for it to continue lending to a state.

Conversely, Schauble has on more than one occasion said debt relief is unnecessary at this point, rather, reforms by the leftist Greek government are a priority.  

Another point on which the IMF disagrees is the Greek government’s insistence on tax hikes comprising the bulk of a 5.4-billion-euro austerity package to meet set primary budget surplus goals through 2018, another bailout condition. The Fund’s solution, reports state, is an additional package of measures, worth 2 percent of Greek GDP, coming via an automatic mechanism to cut spending, primarily from public sector wages and primary pensions. Most elements of the first package had been agreed to when the IMF aired its concerns that even if fully implemented the measures would not achieve a 3.5-percent primary budget surplus in 2018.

The fact that the Greek government, including Prime Minister Alexis Tsipras, has more-or-less precluded the idea of detailing and budgeting such prior measures in the face of IMF demands is reminiscent of the situation last July, when negotiations at the time broke off.

No official press briefing was made after Tuesday’s two-and-a-half hour meeting at the Maximos Mansion government house, yet a top government official conveyed the Tsipras government’s positions in an unofficial manner, namely:

• “Greek issue” negotiations remain “fluid”
• The leftist government will not submit to Parliament a bill describing a “fourth memorandum”, a term used by the opposition recently to vilify the former
• Athens does not want negotiations to drag on until late May
• Last summer’s explosive and contentious situation is absent, with “most sides admitting that a quick agreement must be found”
• All sides, sans the IMF, accept the Greek government’s counter-proposal for a mechanism to activate contingency package, according to the unnamed source speaking for the Greek government
• Conversely, Athens admits that the IMF has said it does not fully comprehend the counter-proposal tabled by the Greek side and insists on the contingency package passing through Greece’s parliament.