The spring meetings of the International Monetary Fund and The World Bank have been kicked off in Washington DC. During these meetings, the Greek government is hoping that there might be some positive developments regarding its efforts to begin the political discussions with its European lenders and the IMF about an essential debt relief which if considered, will be a fundamental element for the country to remain afloat. According to Reuters, in a confidential paper that was recently issued, the IMF describes the debt of Greece as “highly unsustainable”, which is a fact that underscores the emergency for Greece to relieve its debt. However, the new impasse outlined in the negotiations of the Greek government with the IMF and Europe’s technical teams in Athens, creates doubts whether or not a political discussion over the country’s debt can start during the next days in Washington DC given the several issues reportedly remaining open to resolve, at the negotiations of the first review of the Greek economy. In the meantime, the Greek government announced today that it is going to issue two legislative proposals related to the tax and pension reforms. According to the Greek media reports the government hasn’t gotten the approval from the lenders about these two legislative plans yet, but it remains unclear whether or not there had been an informal agreement between the two sides before the government decided to submit them for a parliamentary vote.
In case there hasn’t been such an informal agreement, the risk that the lenders are expected to take for these Greek government actions without their unilateral approval is a fact that will create further tension in their already damaged and dysfunctional relations especially those between Athens and the IMF.
An IMF source that spoke to the National Herald said that the executives in the organization working on Greece are waiting to see the legislative proposals before making any comment. What is clear for the moment though is that the IMF won’t pressure Europeans anymore for a bold and profound debt relief for Greece. It seems that the IMF Managing Director Christine Lagarde and the German Chancellor Angela Merkel, after their private meeting in Berlin have agreed to find a consensus and a unified approach to dealing with the longstanding Greek problem. That is apparently the reason that the IMF shifted its pressuring rhetoric towards Europeans for a generous Greek debt relief to the general call to them for taking these necessary steps to make the existing fiscal adjustment program of Greece sustainable. Is that a sign of retreat of the IMF from the firm stance it was keeping all the previous time about the need for Europe to provide Greece with a broad relief for its debt? That might be the case. In either way, the Greek government has no reason to feel concerned about the latest developments in the negotiations, especially after seeing the latest review issued on Tuesday by the IMF on the outlook of the World Economy. In this report, the IMF refers to Greece mentioning the possibility of a potential new adjustment program, implying the fact that the terms and the goals of the current bailout program signed by the Greek government last summer are considered not realistic anymore and need to be revised. Usually, this kind of revision bears further austerity measures for a country which already counts six consecutive years under a severe economic recession.
How the end of this story plays out and how it will look in the long run is yet unclear to answer.
Originally published on The National Herald