Greece has become the focus of a battle between European nations and the International Monetary Fund (IMF). The economically struggling nation that is drowning in debt will not receive any additional aid from the IMF, according to a senior International Monetary Fund official, unless Greece’s creditors in Europe agree to concise debt relief terms.
Unfortunately, for Greece, to date, those European creditors have refused to commit to such detailed debt relief plans, leaving Greece in the middle of a power struggle between the IMF and the Eurozone.
What European finance ministers believed to be an agreement between their nations and the IMF that would have led to the IMF releasing additional bailout funds for Greece fell apart on Wednesday when they failed to provide the IMF with concrete details of their debt relief plans.
The IMF maintains that the creditors’ role in assisting Greece is just as important as its own, and that Greece will never escape its current debt spiral without such relief.
The tentative agreement, however, may have paved the way for Germany to step up and provide some additional funding. Still, negotiations on that front will likely be very tough, and are scheduled to take place later this year.
If it goes through, it may lessen the burden on the IMF when it comes to propping up Greece’s beleaguered economy. Nevertheless, these plans remain too ethereal for the IMF’s tastes.
The IMF’s representative said on Wednesday, “Fundamentally, we need to be assured that the universe of measures that Europe will to commit to…is consistent with what we think is needed to reduce debt…We do not yet have that.”
Still, he acknowledged that Greece desperately needs debt relief and financial aid if it is to survive. “All the stakeholders now recognize that Greek debt is … highly unsustainable. They accept that debt relief is needed; they accept the methodology that is needed to calibrate the necessary debt relief.
They accept the objectives of gross financing needs in the near term and in the long run. They even accept the time tables.”
Many economists feel this latest scuffle between the IMF and Eurozone is merely the latest in a long list of battles that have no effect other than to harm Greece. Who should move off their position, however, is hotly debated.
Megan Greene, Chief Economist at Manulife and John Hancock Asset Management Tweeted: “Summary of Eurogroup: Germany always wins, IMF caves under pressure from Germany and U.S., no one does what’s in Greece’s best interests.” On the other hand, Marc Chandler, Global Head of Currency Strategy for Brown Brothers Harriman, said the negotiations amount to a “paper charade” that serves Eurozone interests at the expense of Greece.