Athens caves in, accepts IMF participation in bailout plan

Anti-IMF graffiti. Athens, May 2015. [Denis Bocquet/Flickr]

Greece “fully accepted” on Thursday (14 January) that the hardline IMF take a role in its massive third bailout, backing away from one of the last battle lines splitting Athens and its eurozone creditors.

Eurogroup chief Jeroen Dijsselbloem announced the decision at talks with the 19 eurozone ministers in Brussels, and hailed the Greek government for all its “hard work” since agreeing to a strict €86 billion bailout programme in July.

Greek Prime Minister Alexis Tsipras had said in December that the participation of the IMF in the bailout, Greece’s third since 2010, was not necessary and that the programme could be handled by eurozone authorities alone.

But the participation of the IMF is a key condition for Germany, which believes the European Commission alone, as the representative of creditors, could be too soft on Athens when it comes to reform implementation.

“[Greek Finance Minister Euclid] Tsakalotos confirmed to me that the Greek government accepts that the IMF needs to be part of the process,” Dijsselbloem told reporters before a ministerial meeting to discuss Greece’s reform progress.

“It was absolutely clear to him, it was part of the agreement this summer,” Dijsselbloem said.

>>Read: Eurozone holds back new payments for Greece

Tsakalotos confirmed the decision in an interview with Germany’s Handesblatt newspaper, which followed a stern warning by Pierre Moscovici, the EU’s top economics affairs official, that Greece must not “play games” over the IMF.

“The IMF’s participation is planned. We are sticking to this commitment,” Tsakalotos told the daily.

Pensions reform under scrutiny

But for the IMF to be part of the scheme, under which Greece might receive up to €66 billion in new aid, the Fund wants Athens to push through pension reforms and the eurozone to agree to re-profile Greek debt to cut its net present value.

“To get the IMF on board, they have been very clear they want a deep and thorough pension reform, a solid budget, fiscal issues to be addressed and they want a sustainable debt and then they will step back in,” Dijsselbloem said.

Greece submitted its pension reform plan to Brussels last week and eurozone officials have said it was ambitious and acceptable in its broad architecture, but it was still unclear whether it would have the desired fiscal impact because it lacked some numeric data.

>>Read: EU official: Greek bailout deal still open for fine tuning

“It’s a serious proposal,” Dijsselbloem said. “The key question is whether in terms of financial sustainability it all adds up,” Dijsselbloem said.

Eurozone ministers will hold Greek debt relief talks – which will focus on loan maturities, grace periods and interest rate reduction – only once Athens gets their approval for a package of reforms agreed under the bailout.

That approval, called the “conclusion of the first review” could come in February, some eurozone officials have said. But Dijsselbloem was less upbeat: “It would rather be months than weeks.”

Officials note that parliamentary elections in Ireland and Slovakia over the next two months were likely to weigh on the timing of the Greek debt discussion, because neither Dublin nor Bratislava would want the issue to influence their voters.

Eurozone leaders reached an agreement on a programme to save Greece from bankruptcy after 17-hour talks on 13 July.

>> Read: Eurozone reaches ‘laborious’ tentative deal on Greece

If approved by parliaments, this will be the third rescue programme for Greece in five years. It will be managed by the European Stability Mechanism (ESM), the eurozone permanent crisis resolution fund that was initially set up five years ago in an effort to save Athens from bankruptcy.

Here is a look at what Greece must do:

  • Request continued support from the International Monetary Fund after its current IMF program expires in early 2016.
  • Streamline consumer tax and broaden the tax base to increase revenue.
  • Multiple reforms to the pension system to make it financially viable.
  • Safeguard the independence of the country's statistics agency.
  • Introduce laws within days that would ensure "quasi-automatic spending cuts" if the government misses its budget surplus targets.
  • Overhaul the civil justice system to make it more efficient and reduce costs.
  • Carry out product market reforms that include allowing stores to open on Sundays, broadening sales periods, opening up pharmacy ownership, reforming the bakeries and milk market and opening up closed and protected professions, including ferry transport.
  • Privatise the electricity transmission network operator unless alternative measures with the same effect can be found.
  • Overhaul the labour market. This includes reviewing collective bargaining, industrial action and collective dismissal regulations.
  • Tackle banks' non-performing loans and strengthen bank governance.
  • Significantly increase the privatisation program, transferring €50 billion worth of Greek assets to an independent fund, based in Greece, to carry out the privatisations.
  • Modernise, strengthen and reduce the costs of Greek administration.
  • Allow members of the three institutions overseeing Greece’s reforms - the European Central Bank, IMF and European Commission, previously known as the 'troika" - to return to Athens. The government must consult with the institutions on all relevant draft legislation before submitting it to public consultation or to parliament.
  • Reexamine, with a view to amend, legislation passed in the last six months that is deemed to have backtracked on previous bailout commitments.
  • Early February: First review of Greece's third bailout programme is expected.

Subscribe to our newsletters