US Applies the Brakes to IMF’s Exit from the Greek Program

There was a forceful intervention by the Americans yesterday in favor of the International Monetary Fund’s participation in the Greek program, but also in favor of the need for relief of the Greek debt. In a telephone call to his Greek counterpart Euclid Tsakalotos, U.S. Secretary of the Treasury Jack Lew noted the “important role of the IMF in the reforms process,” while encouraging the Greek government to continue reforms and to “cooperate closely with its international partners.”

With his visit today to Berlin and his meeting with Wolfgang Schauble, Greek Minister of Finance Tsakalotos concluded a cycle of contacts with the key players of the European economy. Yesterday, he met with his Dutch counterpart and Eurogoup* President Jeroen Dijsselbloem, who limited his comments to saying that their discussion was constructive and that it will be continued at the Eurogroup on Thursday. Now, together with the intervention by U.S. Treasury Secretary Lew, there is no one in the important centers of decision-making who agrees with Alexis Tsipras’s position about the IMF’s departure from the negotiations. Tsakalotos may have explained the number of conditions the Greek government has met since summer, but it seems that he did not manage to change the opinion of his counterpart regarding the fact that it is not necessary to involve the IMF, which is expected to maintain a particularly tough stance toward both the budgetary and the insurance reforms, in the program.

Thus, the primary goal of his visits was to explain the number of the conditions satisfied by the Greek government since summer, but second, and perhaps more importantly, to lay the groundwork in view of the difficult assessment that needs to be completed in the period ahead. And with these visits, Tsakalotos is hoping to gain favor with the ministers of finance before the negotiations have even begun.

The message that Tsakalotos received — from Helsinki and the “tough” Finnish Minister of Finance Alexander Stubb to his more “lenient” French counterpart — was clear and more or less the same: There is no program without the IMF. And while a number of European officials have stated in the past that the program cannot exist without the IMF’s participation, Tsakalotos wanted to have discussions with the key protagonists in person and investigate how important such participation in the Greek program is to them.

A first, albeit small, sample of the position taken by the institutions toward the suggestion of the Greek government about the insurance framework will appear tomorrow during the planned Eurogroup meeting. While the discussion will be short, European officials are expecting to discuss the IMF’s role in the program, and a number of ministers are expected to stress the necessity of the fund’s participation. Also, because of the annual discussion about Article 4 of the IMF, high-ranking members of the IMF (including Poul Thomsen**) are expected to be present at the discussion table, members that haven’t physically been present at a Eurogroup meeting since the summer.

At the same time, it is expected that a timetable will be set for the potential completion of the negotiations. During the Εuro Working Group meeting last week, both the institutions and also the Greek side said that that the deadline will be the end of February. A number of officials told Kathimerini unofficially that that is not a realistic scenario, and that the negotiations will last much longer. Additionally, it is likely that Greece’s funding needs for the following months will be presented, with the end of February being the critical point after which, and according to the institutions’ estimate, the country’s cash will start “hitting red” again.

Yesterday, Mr. Lew also underlined the need for the international community to maintain its commitment to put Greece on a sustainable path through relieving the debt, since Greece continues to meet its commitments by implementing the agreed reforms. U.S. Treasury Secretary Lew also congratulated Tsakalotos for the reforms that Greece has adopted to date, while stressing that the U.S. Treasury continues to keep a close eye on the economic situation in Greece.

*Editor’s note: The Eurogroup is the recognized collective term for informal meetings of the finance ministers of the Eurozone, i.e., those member states of the EU that have adopted the euro as their official currency.

**Editor’s note: Poul Thomsen is the director of the IMF’s European Department.