WSJ: IMF, Citing Risks to Bailout, Hesitates on More Aid


The architect of Greece’s emergency bailout Friday signaled the International Monetary Fund isn’t likely to soon rejoin Europe in more financing for the debt-worn country, if at all.

Poul Thomsen, head of the IMF’s European department, said a fund team would travel to Athens within a week or two to restart long-dead negotiations for a new emergency-financing facility.

But his reiteration of the fund’s stance on the need for debt restructuring and call for further pension overhauls underscore the improbability of the fund moving ahead with a third bailout in seven years anytime in the near future.

“There is a strong and full agreement inside this institution on what should be the main components of a Greek program,” Mr. Thomsen said.

Since July 2015, Greece has relied on financing from the rest of the eurozone, whereas the IMF’s participation as a lender has been on ice because it believes Greece’s debt isn’t sustainable. The fund argues that eurozone governments, led by Germany, need to restructure their loans to Athens to ensure Greece’s solvency, and that deeper market-oriented reforms are needed in Greece to revive growth.

Greece’s current bailout program, worth up to €86 billion, runs out in 2018. Germany’s government is eager to get the IMF back on board as a lender. German lawmakers view the IMF as vital for enforcing economic overhauls in Greece. And Berlin wants IMF involvement to give its program credibility to both markets and voters, who have long been reluctant to lend Greece cash.

The problem is that Greece still isn’t willing to move forward with all the economic reforms the IMF says are needed to return the country to health. And Germany, Europe’s fiscal disciplinarian, has shown little willingness to compromise on its opposition to a major reduction in Greece’s debt pile.

Germany’s marked reluctance to grant Greece debt relief makes many European officials believe a deal with the IMF may prove out of reach entirely. German Chancellor Angela Merkel is likely to become even more averse to costly and unpopular concessions for Greece as her country gets closer to national elections in fall 2017. Berlin is pressing the IMF to rejoin the bailout despite its doubts.

“We have some significant concerns…about risks,” Mr. Thomsen said. He pointed to deficits in the pension system of more than 10% to 11% of gross domestic product a year. The IMF is wary about Athens’ ability to modernize the public sector. The fund is skeptical current budget targets are realistically achievable.

On the other side of the ledger, he said the IMF is still holding firm on its requirement for debt relief: “We have not changed our mind on this.”

Though both the IMF and Europe earlier this year championed what they called a debt-relief deal, Mr. Thomsen admitted that negotiations on what debt relief will actually entail are only expected “in the coming months.”

Adding to the challenges, the senior IMF official also indicated that the limited time left in Europe’s financing agreement could complicate IMF involvement.

If the IMF and Greece are able to hammer out a new bailout agreement in the coming weeks, “By the time that we would go to the Board I think there will be 18 months or so left of a new (European) program,” he said. “We have not discussed what this implies for the duration of a new Fund program. That will still have to be discussed.”