Handelsblatt leaks compromise between IMF and Berlin over Greece

24 May 2017
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The German Handelsblatt economic daily claims Berlin and Washington have come to an understanding over the German programme. The deal authorizes the German minister of finance, Wolfgang Schäuble, in exchange for specific commitments for debt relief.

According to Bloomberg, the IMF reject the Eurogroup’s proposal for a 15-year extension in Greek bond yield maturities, that is, an indirect “haircut” in the size of the Greek debt. The suggestion is that this did not go far enough in making the Greek debt viable, according to New Europe.

Greece will default by July if it fails to pay €7.3 bn in maturing bond yields. But, while Greece has kept its side of the bargain by introducing yet another cluster of austerity measure last Thursday, the Eurogroup failed on Monday to provide assurances to markets that this will not happen.

Meanwhile, the lack of confidence in the Greek economy has plunged the country into recession.

Germany appears reluctant to approve debt relief measures, which are deeply unpopular, at least while the CDU-led government is running an electoral campaign. The emergence of the AfD movement on the right of the Christian Democrats was originally a Eurosceptic reaction to the fear that Germany will turn into Europe’s “paymaster.”

Meanwhile, the outgoing Dutch finance minister and President of the Eurogroup, Dijsselbloem, acknowledged on Tuesday that the IMF is “impressed” by the resolve Athens has shown in adopting structural reforms and is ready to commit financially. Germany’s Finance Minister, Wolfgang Schaeuble, also said with confidence that a deal should be possible within three weeks.

However, the head of the IMF’s European Department, Paul Thomsen, made clear on Tuesday that Washington wants to see “specificity” in debt relief measures. One may assume that the Handelsblatt leak refers to a more “specific” set of debt relief measures that go beyond a 15-year extension on Greek bond yield maturities. That now appears to be the benchmark.

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