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.
Greece will receive a third bailout after marathon talks in Brussels where eurozone leaders have reached the agreement.
EU chairman Donald Tusk has announced leaders agreed “in principle” on negotiations for the bailout, “which in other words means continued support for Greece”.
Greece’s PM Alexis Tsipras said that after a “tough battle”, his country had secured a “growth package” of €35 billion, and won debt restructuring.
The country will now have to pass reforms demanded by the eurozone by July 15.
“There will not be a <<Grexit>>,” said European Commission head Jean-Claude Juncker, referring to the widespread fear that if there had been no deal, Greece would have had to leave the eurozone.
Alexis Tsipras also said he had the “belief and the hope that… the possibility of <<Grexit>> is in the past”.
“The deal is difficult but we averted the pursuit to move state assets abroad,” he said.
“We averted the plan for a financial strangulation and for the collapse of the banking system.”
Jeroen Dijsselbloem, the head of the eurozone group of finance ministers, said the agreement included a €50 billion Greece-based fund that will privatize or manage Greek assets. Out of that €50 billion, €25 billion would be used to recapitalize Greek banks, he said.
Greek banks have been closed for two weeks, with withdrawals at cash machines limited to €60 per day. The economy has been put under increasing strain, with some businesses closing and other struggling to pay suppliers.
Eurozone finance ministers are due to meet later on Monday to discuss providing “bridge financing” that would cover Greece’s short-term needs.
Parliaments in several eurozone states have to approve any new bailout.
“The road will be long, and judging by the negotiations tonight, difficult,” German Chancellor Angela Merkel said on July 13.
French President Francois Hollande said the agreement had allowed Europe to “preserve integrity and solidarity”.
“We also had to show that Europe is capable of solving a crisis that has menaced the eurozone for several years,” he said.
Eurozone leaders had been meeting in Brussels for 17 hours, with talks continuing through the night.
During the talks, reports emerged that Greece was holding out over the proposed role of the International Monetary Fund (IMF) in a new program, and over the fund to hold Greek assets.
Eurogroup is due to resume talks in Brussels on a bailout deal for Greece.
Nine hours of talks on July 11 ended without agreement and Eurogroup leader Jeroen Dijsselbloem described negotiations as “very difficult”.
Eurozone finance ministers have expressed skepticism Greece will implement the austerity measures it has proposed.
They have little time to produce a working plan ready for European leaders who meet in Brussels later on Sunday.
“We have had an in-depth discussion of the Greek proposals, the issue of credibility and trust was discussed and also of course financial issues involved, but we haven’t concluded our discussions,” Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers, told reporters as the earlier round of talks broke up.
“It is still very difficult but work is in progress.”
Talks are due to resume at 09:00 GMT.
Greek lawmakers have backed the latest measures proposed by PM Alexis Tsipras, despite the fact that many of the ideas were rejected by the Greek people in July 5 referendum.
Greek Finance Minister Euclid Tsakalotos is attending the talks in Brussels, trying to convince his counterparts that his government can be trusted to push through their economic reform plan.
Before talks began on July 11, Jeroen Dijsselbloem said there were concerns not just about “the content of the proposals, but also on the even more difficult issue of trust”.
“How can we really expect this government to implement what it’s now promising? I think it’s going to be quite a difficult meeting,” he said.
German Finance Minister Wolfgang Schaeuble said Greece would have to do more than promise reforms if it wanted more money.
“We will definitely not be able to rely on promises,” he said.
Reports on July 11 suggested that German ministers were drawing up a plan that would allow Greece to exit the eurozone temporarily if this weekend’s talks fail – something Athens says it is not aware of.
There were also unconfirmed reports that Finland had refused to agree to the new bailout proposals, although on its own it is unlikely to stop any deal going ahead.
Greece is asking creditors for €53.5 billion ($59.47 billion) to cover its debts until 2018.
However, the amount of the new bailout could reach €74 billion as Greece seeks a restructuring of its massive debt, which it says is unsustainable.
Of the €74 billion, €58 billion could come from the EU’s bailout fund, the European Stability Mechanism, with €16 billion from the IMF, sources have said.
As talks drag on, Greece’s financial situation is close to collapse.
Banks have been closed for two weeks and a €60 ($66) daily limit on cash machine withdrawals, imposed on June 28, remains in force for Greek citizens.
Rival rallies have been held in the Greek capital ahead of a crucial debt referendum on July 5.
PM Alexis Tsipras was greeted with huge cheers by tens of thousands of Greeks when he told supporters to vote “No” to the terms of an international bailout.
Those attending another huge rally nearby warned a “No” vote would see Greece ejected from the eurozone.
A Greek court earlier rejected a challenge to the legality of the referendum and it will go ahead.
Greece’s current bailout program ran out on June 30. All week banks have been shut, with limits imposed on cash withdrawals.
Another war of words flared late on July 3 when Finance Minister Yanis Varoufakis dismissed a Financial Times report that Greece was preparing contingency plans for a possible “bail-in” of bank deposits as a “malicious rumor”. The report quoted sources as saying banks were considering a “haircut” of 30% on deposits over €8,000.
Opinion polls on July 3 suggested Greece was evenly split over the vote – an Ipsos survey putting “Yes” supporters at 44% and “No” at 43%.
Opinion polls within 24 hours of the voting are banned, as are more campaign rallies.
Estimates of the crowds gathered in Athens on July 3 ranged from 25,000 to 50,000, with police and observers agreeing that the crowds at the “No” rally were bigger.
Rallies for both camps were held in 10 other Greek cities.
In his speech, Alexis Tsipras reiterated the themes of almost daily addresses over the past week – the need for Greece to preserve its dignity and “say a proud <<No>> to [European] ultimatums” to sign up to fresh austerity.
The prime minister said: “This is not a protest. It is a celebration to overcome fear and blackmail.”
Alexis Tsipras urged Greeks to “decide to live in dignity in Europe”.
He denied a “Yes” vote would mean leaving Europe, saying: “We are not going to allow them to destroy Europe.”
Only a few hundred meters away, supporters of a “Yes” vote said they believed Alexis Tsipras could not deliver on such a promise.
Athens Mayor George Kaminis told supporters at the rally that people did not even understand the question on the ballot paper.
He said: “We have been dragged into a pointless referendum that is dividing the people and hurting the country.”
Claims by Greek politicians that a “No” vote will strengthen their hand in bailout negotiations have been rebuffed by European leaders.
Both EU Commission President Jean-Claude Juncker and Jeroen Dijsselbloem – head of the Eurogroup of finance ministers – have insisted a “No” vote will weaken the Greeks’ position and that even a “Yes” vote will not mean a deal is easy to agree.
Several European officials have complained in strong terms about Greece’s abrupt decision to hold a referendum on the terms of a bailout offer they say is no longer on the table.
The Greek lawmakers have backed plans for a referendum on international creditors’ terms for a new bailout.
The July 5 referendum was called by Prime Minister Alexis Tsipras, who opposes further budget cuts. He urged voters to deliver a “resounding <<No>>” to the package.
Eurozone partners have criticized Greece’s referendum announcement, and rejected its request to extend the bailout program beyond June 30.
Greece could default on a €1.6 billion repayment to the International Monetary Fund (IMF) due on that day.
There are fears the country may leave the euro and that its economy may collapse without new bailout funds.
Alexis Tsipras’ motion on a referendum easily won backing in the 300-member strong parliament, with at least 179 lawmakers voting in favor of it in the early hours of Sunday, June 28.
Speaking just before the vote, Alexis Tsipras described the creditors’ proposal as “an insulting ultimatum” and said an emphatic “No” vote on July 5 would strengthen Greece’s negotiating position.
His government had earlier rejected the creditors’ offer of a five-month extension to Greece’s bailout program in exchange for reforms.
On June 28, eurozone finance ministers rejected the Greek proposal for the bailout extension beyond Tuesday’s deadline. A Eurogroup statement said Greece had broken off negotiations over a new bailout deal “unilaterally”.
Eurogroup head Jeroen Dijsselbloem said it would now be up to the European Central Bank (ECB) to decide whether to continue providing emergency liquidity funding to the Greek banking system.
Meanwhile, queues have formed in Greece outside banks in the past few days amid concerns that the central bank might start restricting withdrawals.
A meeting of European finance ministers in Luxembourg ended with no agreement on Greece’s debt.
The head of the Eurogroup, Jeroen Dijsselbloem, has said that Greece needs to seize a “last opportunity” to reach a deal with its creditors.
Jeroen Dijsselbloem called on Greece to submit “credible” proposals in the coming days.
To help tackle the crisis, an emergency summit of leaders from Eurozone nations has been called for June 22.
Jeroen Dijsselbloem highlighted that “very little time remains” as Greece’s current bailout program runs out this month.
“It is still possible to find an agreement and extend the current program before the end of the month, but the ball is clearly in the Greek court to seize that last opportunity,” he said.
The Greek finance minister, Yanis Varoufakis, said his nation had presented a “comprehensive” proposal and that disagreement only existed over spending equivalent to 0.5% of Greek GDP, which he says does not constitute a “dangerous impasse”.
Yanis Varoufakis highlighted that Greece has already made a “gigantic adjustment” over the last five years and rejected any measures that would “jack-up” taxes and reduce benefits further.
He warned that negotiations were “dangerously close to a state of mind that accepts an accident”.
Greece has less than two weeks remaining to strike a deal with its creditors or face defaulting on an existing €1.6 billion loan repayment due to the IMF.
The country has already rolled a €300 million payment into those due on June 30.
If it fails to make the payment, Greece risks has to leave the eurozone and possibly also the EU.
The European Commission, the IMF and the European Central Bank (ECB) are unwilling to unlock bailout funds until Greece agrees to reforms.
They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2 billion of funds, which have been delayed since February.
Pressure was also raised on Greece today when the boss of the International Money Fund (IMF), Christine Lagarde, warned there was “no period of grace” for Greece over its impending debt repayment deadline.
Christine Lagarde said Greece would be in default on its loans from the IMF if it failed to make a €1.6 billion ($1.8 billion) payment on June 30.
The Eurogroup has approved a list of reforms submitted by Greece as a condition for extending its bailout by four months, officials say.
Eurozone finance ministers said they had agreed to begin national procedures – parliamentary votes in several states to give the deal final approval.
The measures offered by Greece include combating tax evasion and reforming the public sector.
However, IMF chief Christine Lagarde said they lacked “clear assurances” in key areas.
Greece’s debt stands at more than €320 billion, and its current €240 billion bailout expires on February 28. Fresh funding will not be released until Greece’s proposals are approved in detail.
The stakes of talks over continued financial aid have been high because of fears of a Greek default that could push it out of the euro, triggering turmoil in the EU.
The main stock market in Athens rose by nearly 10% on February 24, hitting a three-month high.
The Eurogroup said in a statement: “We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close co-ordination with the institutions.”
The European Commission and the European Central Bank (ECB) both stated that the Greek proposals were a “valid starting point”.
The agreement had “averted an immediate crisis,” said European Commissioner for Economic Affairs Pierre Moscovici.
“It does not mean we approve those reforms, it means the approach is serious enough for further discussion,” he added.
However, Christine Lagarde expressed reservations about the reform proposals.
“In some areas like combating tax evasion and corruption I am encouraged by what appears to be a stronger resolve on the part of the new authorities in Athens,” Christine Lagarde wrote in a letter to the Eurogroup.
“In quite a few areas, however, including perhaps the most important ones, the letter is not conveying clear assurances that the government intends to undertake the reforms envisaged.”
The IMF, ECB and the Commission make up the “troika” of institutions that have managed financial rescue programs for Greece since 2010.
The four-month bailout extension was agreed on Friday after several rounds of talks, pending Greece’s delivery of its reform proposals.
The deal was widely seen as a climbdown by Greek PM Alexis Tsipras. The newly elected leader of the left-wing Syriza party is trying to balance satisfying the demands of creditors with meeting his pre-election pledges.
Alexis Tsipras’ government wants to clamp down on tax evasion, corruption and inefficiency in order to fund social spending and alleviate what it calls Greece’s “humanitarian crisis”.
ECB head Mario Draghi noted that Greek commitments “differ from existing program commitments in a number of areas”.
He said there would be a need to assess whether measures rejected by Greece were “replaced with measures of equal or better quality”.
Eurogroup chairman Jeroen Dijsselbloem said the Greek government had a right to put its own “stamp” on the bailout program.
“The new government is much more aggressive on taxes and corruption, and these are excellent things,” Jeroen Dijsselbloem told Dutch radio.
“But the Greek government is perhaps too optimistic about the speed with which they can boost tax revenues.”
Greek reform proposals:
Combat tax evasion
Commit not to roll back already introduced privatizations, but review privatizations not yet implemented
Introduce collective bargaining, stopping short of raising the minimum wage immediately
Tackle Greece’s “humanitarian crisis” with housing guarantees and free medical care for the uninsured unemployed, with no overall public spending increase
Reform public sector wages to avoid further wage cuts, without increasing overall wage bill
Achieve pensions savings by consolidating funds and eliminating incentives for early retirement – not cutting payments
Reduce the number of ministries from 16 to 10, cutting special advisers and fringe benefits for officials [youtube n6Vg2JqKhUw 650]
Greece and the eurozone finance ministers have reached a deal to extend its bailout by four months after talks in Brussels.
The extension will allow Greece to negotiate a follow-up arrangement with creditors.
“The Greek authorities have expressed their strong commitment to a broader and deeper structural reform process aimed at durably improving growth and employment prospects, ensuring stability and resilience of the financial sector and enhancing social fairness,” the Eurogroup said in a statement.
Dutch finance minister Jeroen Dijsselbloem, head of the Eurogroup, said that Athens had pledged to honor all its debts.
“This is a very positive outcome,” Jeroen Dijsselbloem told a news conference on Friday night.
“I think tonight was a first step in this process of rebuilding trust. As you know trust leaves quicker than it comes. Tonight was a very important, I think, step in that process,” he added.
Greece had agreed to present an initial list of reform measures by February 23, Jeroen Dijsselbloem said.
Athens welcomed the deal, which a Greek government official said gave it time to negotiate a “new deal”.
“Greece has turned a page,” the official said.
“We have avoided recessionary measures.”
Greece had been seeking a six-month extension of the bailout but the Eurogroup opted for four months.
The euro gained against the US dollar on February 20 following the announcement, adding 0.3% to $1.1403, while the Dow Jones industrial average and S&P 500 struck new intraday highs.
The agreement removes the immediate risk of Greece running out of money next month.
The new deal also provides a breathing space for the new Greek government to try to negotiate longer-term debt relief with its EU creditors.
Greece has failed to reach an agreement with eurozone officials over the country’s debt crisis, though both sides said there was still hope for a deal.
Eurogroup President Jeroen Dijsselbloem said seven hours of talks in Brussels had been “constructive”.
They ended without a joint statement to outline procedural steps ahead of further talks on February 16.
Greece says its bailout deal with the EU is punitive and must end. The EU has warned Greece to abide by the deal.
Greek left-wing government says the conditions of the €240 billion ($272 billion) bailout have impoverished Greece.
It was elected on a promise to end the bailout and ease the austerity measures that have accompanied it.
The government has proposed to overhaul 30% of its bailout obligations, replacing them with a 10-point plan of reforms.
However, Greece’s creditors in the EU, led by Germany, have insisted that the terms of the bailout cannot be altered.
Officials from the two sides have been locked in negotiations aimed at reaching a deal on Greece’s debt repayments that would stave off the prospect of its exit from the eurozone – a prospect viewed with fear by the markets.
Jeroen Dijsselbloem, who heads the Eurogroup eurozone finance ministers, said after the meeting on Wednesday that there had been no discussion of detailed proposals.
“We didn’t enter into negotiations on content of the program or a program, we simply tried to work next steps over the next couple days,” he said.
“We were unable to do that.”
“We had an intense discussion, constructive, covering a lot of ground, also making progress, but not enough progress yet to come to joint conclusions,” he said.
Greece’s finance minister Yanis Varoufakis struck an upbeat note, saying hours of emergency talks in Brussels had produced “very good discussions”.
Greek officials had rejected a draft agreement from the eurozone finance ministers that proposed “extending” the current bailout deal, Reuters reported.
The current EU-IMF bailout for Greece is due to expire on February 28.
The Greek government rejects the “troika” team – the EU, International Monetary Fund (IMF) and European Central Bank (ECB) – overseeing the bailout’s implementation.
It is asking for a “bridge agreement” that will enable it to stay afloat until it can agree a new four-year reform plan with its EU creditors.
Greece’s debt currently stands at more than €320 billion – about 174% of its economic output (GDP).
On February 11, thousands of left-wing demonstrators rallied in Athens in support of their government’s proposition.
The stakes of the talks over Greece’s debt are high because of fears that a Greek default could push it out of the euro, triggering turmoil in the EU.
The Greek Defense Minister, Panos Kammenos, previously said Greece might seek funding from Russia, China or the US if it failed to reach a new debt agreement with the eurozone.