Angela Merkel has said that she expects the International Monetary Fund to take part in a new €86bn (£60bn) bailout for Greece, as the German chancellor prepares to face Bundestag opposition to the package in a vote on Wednesday. In an attempt to reassure sceptical MPs, Merkel said the head of the IMF, Christine Lagarde, would ensure the fund’s participation if conditions on Greek pension reform and debt relief were met.
“Mrs Lagarde, the chief of the IMF, made very clear that if these conditions are met, then she will recommend to the IMF board that the IMF takes part in the programme from October,” Merkel told the broadcaster ZDF. “I have no doubts that what Mrs Lagarde said will become reality.”
Representatives from Merkel’s Christian Democratic Union and its Bavarian sister party, the Christian Social Union, want the IMF involved because of its reputation for rigour.
Lagarde, who has been pressing eurozone countries to provide Athens with “significant” debt relief, reiterated at the weekend that Greece’s European creditors must make “concrete commitments” on relieving the debt burden. She has said the IMF will wait until October to decide whether to participate. That would force lawmakers to vote without any guarantees that the Washington-based institution would have a role.
In a nod to IMF calls for debt relief, Merkel said there was room to ease the burden on Greece by extending the maturities on its debt and reducing interest rates. Greece’s three European creditors – the European commission, the European Central Bank and the ESM bailout fund – also admitted last week that they had “serious concerns” about the level of Greek debt.
Meanwhile, Merkel’s finance minister, Wolfgang Schäuble, told the Bild am Sonntag newspaper that the deal reached last week was “responsible” and ensured that Athens had to execute tough reforms in return for aid. “After truly arduous negotiations, they understand now in Greece that the country cannot get around real and far-reaching reforms,” he said, referring to changes that include an overhaul of the Greek VAT regime and the state pension system.
Schäuble, who has held a tough line in negotiations over extending financial help to Greece, followed up his enthusiasm with warnings aimed at the country’s prime minister, Alexis Tsipras. He said: “These reforms must now be implemented point by point. We will make sure of that. Any further help will be dependent on that.”
Schäuble’s choice of Bild for the interview was a tacit acknowledgment of unresolved domestic sensitivities over the bailout deal. Germany’s biggest newspaper has given Merkel’s government some of the worst press of its tenure after a marathon all-night negotiation in Brussels resulted in the preliminary deal in July. “Merkel rescues Greece with our money,” the newspaper’s headline read the following day, backed up with an editorial accusing the chancellor of breaking her promises on Europe.
German approval of the bailout on Wednesday is not in doubt because of the support of parties such as the Social Democrats and Greens. In a similar vote on 17 July, on whether or not Germany should continue negotiations on a bailout deal, 65 of the 311 CDU/CSU MPs defied the party line, with 60 voting no and five abstentions. The session resulted in 439 voting in favour of the new deal, 119 voting against and 40 abstaining. Dutch lawmakers will also be recalled from their summer recess on Wednesday to vote on the new bailout package.
The timetable for the new deal is tight. Greece’s next payment deadline is Thursday, when it it needs to repay €3.2bn to the ECB. Eurozone leaders said last week that the first €26bn of the new bailout package will be released on Thursday morning, although Greece would only see half of that immediately, since €10bn would be reserved in Luxembourg for recapitalisation of Greek banks, while a further €3bn would be disbursed over the next two months subject to Athens delivering on its pledges.
In October, Greece’s three main creditors – the ECB, the European commission and the International Monetary Fund – will launch their first quarterly review of Greek progress in observing the strict terms of the deal. After that, the eurozone will discuss rescheduling Greek debt.
