The latest meeting of Eurozone finance ministers has granted approval for Greece to be given a tranche of its third bailout, ensuring that the country will be able to meet debt payments falling due next month. The agreement still requires the endorsement of some Eurozone national parliaments, but it is likely that this will be no obstacle. The agreement will release €8.5 billion which will allow the Greeks to meet debts of €7 billion which fall due over the course of July.
The IMF is associated with the discussions between Greece and her Eurozone partners as it participated in the first two bailout loans. The IMF continues to press for debt forgiveness for some part of the mammoth Greek debt, but such a reduction would be a very hard sell to the electorate of certain Eurozone nations, notably Germany which goes to the polls in the autumn. Whilst Christine Lagarde will commend the latest payment to the IMF executive board, it is clear that a potential IMF contribution of approximately €2bn to the current bailout fund would be linked to a longer-term debt relief programme for after the third loan (worth €86 billion) expires next year. Germany is keen that the IMF should contribute to the current bailout, but it is difficult to see how the circle can be squared. Given that the IMF contribution would be only about 2.5% of the bailout funding, it is clear that the IMF participation, were it to happen, would be largely symbolic.
Release of the disbursement has been conditional upon Greece enacting reforms and conducting austerity measures which are designed to restore her to a sustainable economic position. The German finance minister, Wolfgang Schaeuble, put it succinctly: "Greece has to become competitive to get access to debt markets so it can stand on its own two feet. For that Greece has to carry out reforms." His Greek opposite number, Euclid Tsakalotos noted that Greece hoped to be able to return to the international money markets in due course. "There is now light at the end of the tunnel," he said. Long suffering Greek citizens will be very pleased to hear this, one imagines.