IMF Wants To Keep Greece Tethered

While Greece wants an exit from its bailout deals with foreign lenders, the IMF wants to keep itself tied until a recovery is complete.

ATHENS – While Greece is seeking an early exit from its bailout deals with foreign lenders, the International Monetary Fund wants to keep itself tied until a recovery is complete.

Prime Minister Antonis Samaras said he wants Greece to wean itself off the aid that came with two rescue packages of 240o billion euros ($317 billion) from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).

The European money runs out this year, four years after the bailouts began, but the IMF aid is set to continue until 2016 and Samaras fears more tough austerity measures that have hurt his ruling New Democracy Conservatives if the organization keeps its hooks in Greece.

The IMF’s precautionary program will ensure that the country’s smooth return to the markets continues and will ease the current assessment, as it will form the policy framework after the end of the bailout agreement, the acting head of the IMF’s European Department, Poul Thomsen, said.

The former head of the Fund’s mission in Greece backed his boss, IMF Managing Director Christine Lagarde, who said the financing group should maintain a lifeline to Greece and that that, “It would be preferable if we retained some kind of relationship.”

Speaking in Washington, Thomsen reiterated Lagarde’s assertion that Greece’s relationship with the Fund is evolving and stressed that “its characteristics will have to be discussed.”

Thomsen noted that the good news is Greece is gradually regaining access to the markets, although interest rates aren’t all that favorable yet because of political instability with Samaras hoping to fend off early elections and a challenge from the major opposition Coalition of the Radical Left (SYRIZA) that is leading in polls.

Lagarde is due to meet in Washington, D.C. with Greek Finance Minister Gikas Hardouvelis on Oct. 12 to talk about the country’s lack of progress in reforms and other issues tied to the bailouts.

Eurozone chief Jeroen Dijsselbloem said in Washington that the sustainability of Greece’s debt should not become a problem because the country has surpassed expectations despite lingering problems and that the bloc’s finance ministers will discuss whether Athens requires further aid.

“I don’t expect debt sustainability to become a problem,” the Dutch finance minister told the Atlantic Council. “Greece has done very well, at a high price, but they exceeded expectations” in terms of reforming its public finances and regaining market trust, highlighting the primary budget surplus the country has achieved.