–IMF Mission Begins Talks Tuesday in Athens

By Heather Scott

WASHINGTON (MNI) – The International Monetary Fund is “supporting
Greece” as it goes through a difficult period, and will begin talks
Tuesday on how to get its loan program back on track, a fund
spokesperson said in a statement.

The statement was in response to a report in German weekly Der
Spiegel Sunday citing high-ranking IMF officials who it said have
signaled the fund will not contribute further financial aid to Greece.

The IMF spokesperson said, “The IMF is supporting Greece in
overcoming its economic difficulties. An IMF mission will start
discussions with the country’s authorities on July 24 on how to bring
Greece’s economic program, which is supported by IMF financial
assistance, back on track.”

This statement largely repeats the statement of fund spokesman
Gerry Rice who told reporters during his regular briefing July 12 that
“there are policy implementation delays in a number of areas, and it’s
clear the economy is going through another difficult period.”

“What we know so far, some targets were met, a number were missed,
in some cases don’t have the data to assess, so have to wait a little
longer to develop the full picture,” Rice said of Greece.

While it is “premature to get into detail,” he said, “clearly the
important thing is to put the program fully back on track.”

What neither Rice nor the Der Spiegel report explained was that
delays in loan tranches or meeting targets and temporary setbacks in IMF
loan programs is quite common, especially in countries with a
particularly difficult financial and economic crises.

Argentina and others experienced multiple delays, but typically as
long as authorities are working on the agreed reforms, the IMF will
continue to provide aid, even if some of the typically quarterly loan
disbursements are delayed.

In his last briefing, Rice repeated the IMF stance that “the basis
for discussions continue to be the objectives of program that has been
agreed with the Greek government.”

But he added that “if there are ideas on how to better achieve the
key program objectives, we are open to discuss them, as is the case in
any of the programs that we support.”

In other words, governments can and frequently have negotiated new
terms, new targets or new measures for achieving the targets. Tranches
also can be delayed when legislative approval is needed for some
reforms, or, as has happened with Greece more than once, an election
causes a change of government.

Der Spiegel said it is clear Greece will not be able to meet the
target of cutting its debt to 120% of GDP by 2020. Granting Greece more
time to meet its budget consolidation goals would require E10-50 billion
in additional aid, according to estimates by the troika, the EU
Commission, the ECB and the IMF.

German daily Sueddeutsche Zeitung reported Monday that Germany and
many other Eurozone member states are also not willing to grant Greece
additional financial aid. German Chancellor Angela Merkel is not
prepared to ask parliament to approve more aid for Greece, the paper
cited government sources as saying.

German government spokesman Georg Streiter Monday refused to
comment on how Merkel would position herself if further aid for Greece
would become necessary.

Der Spiegel also said the risk of Greece leaving the Eurozone is
now seen as manageable. In order to avoid a contagion effect, Eurozone
governments want to wait until Europe’s permanent rescue fund ESM is in
operation. A first ruling by the German Constitutional Court on the ESM
is scheduled for September 12.

In the meantime, the ECB might bridge the gap, Der Spiegel wrote.
On August 20, Greece needs to pay back some E3.8 billion to the central
bank. Athens might sell that amount of T-bills to Greek banks, which
could then use the bonds as collateral with the ECB.

Ministry spokeswoman Kothe said that a decision on the planned next
aid tranche for Greece of E31.3 billion will only be made by Eurozone
finance ministers in September when the latest report on Greece by the
troika will be available.

Any funding gaps of Greece in August will have to be bridged by
Greece itself by issuing short-term debt paper on the markets, Kothe
said.

German Economics Minister Philipp Roesler told German ARD public
television in an interview aired Sunday that Greece will most likely not
be able to meet the goals agreed with its international lenders. “I want
to say this here very clearly: if Greece does not meet its obligations,
there can be no further payments to Greece,” he said.

In that case, Greece might come to the conclusion that it would be
better to leave the Eurozone, said Roesler, who is also vice chancellor
and head of the free market-orientated FDP, the junior partner in the
government coalition. “I think that for many experts, for the FDP, and
for me, a Greek exit from the Eurozone has long since lost its horror.”

Government spokesman Streiter said the German government “is
hopeful” that Greece will still be able to meet its committments.

** MNI Washington Bureau: 202-371-2121 **

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