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IMF tells creditors Greece needs help

July 15, 2015

According to the IMF, Greece needs more relief than EU governments have offered. Prime Minister Alexis Tsipras is desperately trying to corral lawmakers into voting for fresh austerity imposed by international creditors.

Alexis Tsipras TV Interview
Image: Reuters/A. Bonetti/Greek Prime Minister's Office

In a report Tuesday, the International Monetary Fund announced that creditors would have to go "far beyond" existing debt relief estimates to stabilize Greece's finances. The IMF's stark warning on Greece's debt came as Prime Minister Alexis Tsipras struggled to persuade deeply unhappy lawmakers to vote for a package of austerity measures and liberal economic reforms to secure a new bailout.

According to the IMF, EU countries will have to give Greece a 30-year grace period on European debt or else make annual transfers to the country's budget or accept "deep upfront haircuts" on existing loans. "The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date - and what has been proposed by the ESM," the IMF reported, referring to the European Stability Mechanism bailout fund.

With opposition help, Greek legislators are expected to accept new credit-for-austerity measures on Wednesday. Prime Minister Alexis Tsipras has until Wednesday night to get the measures - a prerequisite for the 18 other eurozone lenders to begin formal negotiations on the package - adopted by the Greek parliament. The bill includes increases in value-added tax, pension cuts and vast privatizations.

'Tough and punitive'

Tsipras had agreed to the terms during 17 hours of talks on Monday. "The policies imposed on us were irrational," Tsipras said late Tuesday in an interview with state television. "We faced a tough and punitive position from our partners." The prime minister said he took "full responsibility" for signing an accord he did "not believe in, but which I signed to avoid disaster for the country" in the shape of leaving the eurozone.

If Greece enacts the measures, the German parliament would meet in a special session on Friday to debate whether to authorize the government to open new loan negotiations. In Brussels on Tuesday, German Finance Minister Wolfgang Schäuble said some members of his government thought it would make more sense for Greece to leave the eurozone temporarily rather than take another bailout.

"There are many people, including in the federal government, who are quite convinced that in the interests of Greece and the Greek people that what we wrote down would have been much the better solution," said Schäuble, who has taken a tough stance on Greece in recent months and years.

In an interview published Tuesday, Italian Finance Minister Pier Carlo Padoan said most nations fell in line behind Germany: "In the end, only we, the French and little Cyprus were for a compromise."

Though Germany's harsh austerity advocacy has proved popular at home, it is facing backlash from abroad.

mkg/msh (Reuters, AFP, dpa, AP)