General Director of the International Monetary Fund (IMF) Christine Lagarde returned to Washington yesterday to take part in today’s crucial meeting of the IMF Board of Directors, and will attempt to convince the Fund’s members to agree on the body’s participation in the new Greek Programme. The IMF Chief will have the support of Poul Thomsen, the head of the group’s European branch and Mrs. Delia Velkoulescu who is the Fund’s representative in theTroika dealing with the Greek programme. The programme will last for 12 months and the IMF will not participate financially unless the Europeans agree on the debt relief measures required by the Fund.
In particular, the IMF calls for:
Interest rate cuts
Merger of loans, and
the extension of repayment for 20 years.
These measures, which have been repeatedly debated, have not been accepted by Europeans, who continue to believe that Greek debt is viable. “It is not viable,” said a source in Washington who knows the IMF’s talks with Europeans “and everyone has to accept it” because otherwise Greece will still not be a normal state.
Following the revelations by Bloomberg and Reuters news agencies, the source went on to clarify the situation as it currently stood only hours before the meeting of the Board of Directors. The meeting is expected to go smoothly, as the IMF will not exposed, since the amount (€ 1.6 billion) will be approved but not be disbursed, as is the case with all normal programs. The source said that the method devised allows the Fund to venture into these unchartered waters with some security. The issue of the ceiling was trivial the source said, as Athens accepted that public debt could not expand while talks for a debt restructuring were ongoing. “Helping postpone the debt restructuring is a curtain,” the source said. However, he argued that the IMF and the Europeans have committed themselves to a solution by next August. The Greek government has pledged for reforms, including the obligation to address the sustainability of the debt. The source noted that Greece could not make raises, hire employees or increase pensions, as this would raise the debt.