Finance ministers representing the Eurozone will meet Monday to discuss the reforms Greece must undergo before their governments and the IMF can guarantee another bailout.
If an agreement is struck, the finance ministers will send a troop of financial experts from various arms of the European Union (EU), the Eurozone bailout fund, and the IMF to conduct a thorough review of the Grecian financial system to identify much needed reforms, Reuters reports. The first attempt failed in December over disagreements as to what reforms Greece needed and how the Greek government would go about making any proposed reforms.
Currently, Greece is in battle over its next debt payment due in July. Unless Greece is able to raise, or borrow, nearly $7.39 billion, it will default on its debts. If Greece defaults, the fear is that it could catalyze a domino effect in the Eurozone, causing sovereign debt crises to spread throughout Europe. A widespread fear is that defaults in Greece will trigger a debt crisis in Italy — one of the largest bond markets in the world.
Greece defaulted on its debt payments to the IMF once before in 2015, when a political stalemate between lenders and the Greek government clashed over proposed reforms. The current situation looks like it could lead to another default, as the IMF, Greece, and Germany look to be far from reaching an agreement about the next possible bailout.
Speaking on behalf of the IMF Feb. 9, Communications Director Gerry Rice laid out the conditions the IMF would need guaranteed to participate in another Greece bailout. The IMF thinks that there is a little wiggle room for Germany to push for any further budget-tightening measures, saying that “the IMF is not asking for anymore austerity in Greece.” The IMF is calling for structural reforms to the Greek economy, and is asking for European partners to provide Greece with excess liquidity, so that it can make necessary budget cuts.
German officials have made it clear they remain committed to keeping the Eurozone intact, but the government does have some concerns regarding another Greek bailout, including a basic suspicion that Greece is unable to meet the agreed upon target of a “3.5 percent primary surplus.” Furthermore, impending German elections make it politically infeasible for German leadership to ask taxpayers to underwrite another Greek bailout.
Eurozone governments have made it clear that Greece should take on further reforms, or the regional currency area should agree to lower the surplus target from 3.5 down to 1.5 percent and give Greece proposed debt relief to make the reforms sustainable in the long-term.
“The debt is not the defining problem at the moment, it is financed in the longer term,” German Finance Minister Wolfgang Schaeuble told reporters prior to Monday’s meeting. “The IMF will be part of this (bailout).”
Greece stresses that it cannot make any further budget adjustments because of an already tumultuous political climate in the nation. Moreover, Greek leadership thinks the IMF is being unfair in its demands, and is not reevaluating its policies regarding Greece over time. It is unclear at this point if Greece will meet the demands of either the Eurozone lenders or the IMF.
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