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IMF likely to delay contributions to Greek bailout


The International Monetary Fund (IMF) has indicated that they will delay any contributions to a Greek bailout.

The IMF will likely provide funds at a later date, but could hold off at the initial stages.

For the time being, it appears that the IMF remain unconvinced that the terms of the bailout will be enough to make the Greek government’s debt sustainable.

The IMF believes that in order for the debt to become sustainable, the eurozone governments will need to provide some kind of debt relief, whilst the Greek government would have to agree to further reforms.

The debt relief may not come in the form of reductions in the overall debt, but could mean longer repayment terms and the introductions of ‘grace periods’, where the initial repayments would be delayed.

It is most likely that further reforms for the Greek government would include changes to how the government controls spending and raises taxes, whilst they may also be required to implement structural reforms that would remove barriers to economic growth.

However, the eurozone has refused to look into the possibility of making these concessions until the Greek government has started implementing the agreed terms of the bailout. Meanwhile, the Greek government appear to be unwilling to make any further reforms at this time.

Political involvement

It is very unlikely that Greece and the eurozone will be able to convince the IMF to provide any bailout funds at the beginning of the process. However, they may do so at a later date, providing there is some form of debt relief and further reforms.

This isn’t a huge financial barrier, as the eurozone bailout agency, the European Stability Mechanism (ESM) will be able to provide the full €86bn if necessary. This is because the ESM currently has the capacity to approve loans of around €455bn.

The involvement of the IMF does have political implications though. This is because any agreement from the ESM will require approval from some eurozone parliaments such as Germany’s Bendestag.

This approval is not guaranteed, as there are many members of the ESM who are unhappy with the Greek bailout. However, with the involvement of the IMF, this approval would be much easier to attain.

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