Greek politicians wasted no time in seeking a response from the IMF over the leaked transcript released earlier today by Wikileaks suggesting the IMF may threaten to pull out of the country’s bailout as a tactic to force European lenders to more offer debt relief, and which according to the Greek government was “interpreted as revealing an IMF effort to blackmail Athens with a possible credit event to force it to give in on pension cuts which it has rejected.”
According to Reuters, “Greece demanded an explanation from the International Monetary Fund on Saturday after an apparent leaked transcript suggested the IMF may threaten to pull out of the country’s bailout as a tactic to force European lenders to more offer debt relief.”
The officials were quoted as discussing a threat that the fund might not participate in Greece’s third bailout program as a way to force EU creditors, especially Germany, to reach a deal on debt relief before Britain’s June referendum on whether to stay in the European Union.
“The Greek Government asks the IMF for explanations whether pursuing the creation of bankruptcy conditions in Greece, just before the British referendum, is the Fund’s official position,” government spokeswoman Olga Gerovasili told state TV.
An IMF spokesman in Washington said the Fund did not comment on “leaks or supposed reports of internal discussions” but added that the IMF had made its position known in public.
“We have stated clearly what we think is needed for a durable solution to the economic challenges facing Greece – one that puts Greece on a path of sustainable growth supported by a credible set of reforms matched by debt relief from its European partners,” the spokesman said.
“The needed reforms and targets need to be based on credible assumptions. As we have said, there is a trade off between what is feasible on reforms and the amount of debt relief needed.”
Reuters adds that EU/IMF lenders will resume talks in Athens on Grece’s fiscal and reform progress next week aiming to conclude a bailout review that will unlock further loans and pave the way for negotiations on long-desired debt restructuring. The review has been adjourned twice since January due to a rift among the lenders over the estimated size of Greece’s fiscal gap by 2018, as well as disagreements with Athens on pension reforms and the management of bad loans.
Greece hopes for a compromise before April 22, when euro zone finance ministers are to assess its progress.
According to the Reuters read of the transcript, the IMF staffers “discussed whether Greece could apply more austerity as a condition for receiving more aid ahead of big debt repayments in July and voiced frustration at the European Commission’s reluctance to side with IMF pressure on Athens. They also suggest that Brussels is sticking to unrealistic assumptions about Greece’s budget shortfall to minimize the need for debt relief, which is unpopular with Germany and other northern euro zone hawks. If concluded the review will unlock a fresh tranche of about 5 billion euros, which Greece needs to pay off state arrears and ECB and IMF maturing debt. Greece has no major debt redemptions due until July.”
None of this is new, and the incremental data was the peculiar read of the “event” mentioned in our previous post. Reuters tries to tone this down by suggesting that the transcript, if genuine, “appeared to suggest that Thomsen saw more prospect of the IMF applying pressure on German Chancellor Angela Merkel to concede debt relief to keep the fund involved in the bailout and secure Greek cooperation in managing Europe’s pressing refugee crisis.”
However as previously noted, “the Greek government interpreted the leak as revealing an IMF effort to blackmail Athens with a possible credit event to force it to give in on pension cuts which it has rejected.”
As of now it appears unlikely that the IMF will provide further information on what was explicitly stated in the leak, or what may have been implied regarding a potential plan to force Greece into another credit event.
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