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IMF refuses to deny reports that it may cut Greek funding

Der Spiegel says the IMF wants out of Greece as soon as the ESM kicks in in September – and the IMF won’t deny it.

Christine Lagarde's IMF says it's sending a mission to Greece - but hasn't denied reports that it may stop funding its bailouts in two months' time.
Christine Lagarde's IMF says it's sending a mission to Greece - but hasn't denied reports that it may stop funding its bailouts in two months' time.
Image: Haraz N. Ghanbari/AP

THE INTERNATIONAL MONETARY FUND has declined to deny a report that it is preparing to cease bailout funding for Greece once the Eurozone’s new permanent bailout fund is set up in two months.

Authoritative German news magazine Der Spiegel reported that IMF wanted to stop its aid to Greece, saying it had obtained information supplied to EU leaders saying the Washington-based fund was no longer prepared to continue funding the country’s bailout.

The report suggested that once the current temporary bailout fund – the European Financial Stability Facility – was replaced by the new permanent bailout fund, the European Stability Mechanism, the IMF would withdraw from participation in the EU-IMF Troika that is currently keeping Greece afloat.

The ESM was expected to happen earlier this month, but that has now been deferred until September after Germany’s participation in the fund was referred to its Constitutional Court, which is not expected to issue a ruling until September.

Der Spiegel’s report notes that the Troika’s funding commitments to Greece will cost it another €50 billion between now and 2020, and points out that some eurozone governments were already reluctant to back Greece’s second bailout – but agreed to continue participating only because the IMF was also doing so.

‘Supporting Greece in its difficulties’

This afternoon the IMF released a brief statement saying it was “supporting Greece in overcoming its economic difficulties”, and said it would be sending a mission to the country tomorrow.

That mission would meet with local officials to discuss “how to bring Greece’s economic programme, which is supported by IMF financial assistance, back on track.”

The IMF statement did not, however, seek to rubbish the Spiegel report – merely pointing out, for now, that the IMF was funding Greece’s current bailout programme.

Der Spiegel’s report pointed out that the European Central Bank could have to step in in the meantime and ensure that a €3.8 billion Greek government debt, which falls due on August 20, does not result in greater problems.

It hypothesises that Greece may issue some short-term government bonds to its banks, which could then deposit the bonds with the ECB as security for new loans to the stricken government.

Read: Spanish borrowing costs hit record high

About the author:

Gavan Reilly

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