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Sources: IMF and Schäuble Closer to Deal on Greek Debt Bailout

  • Why it matters

    Why it matters

    Greece faces default if euro zone ministers and the IMF fail to reach an agreement over the next tranche of loans. It appears they have struck a compromise.

  • Facts

    Facts

    • Greece has to repay some $8.2 billion in maturing loans by a July deadline and required fresh cash to meet its obligations.
    • The IMF has so far rejected participation, demanding clarity on European plans for a possible debt relief envisioned for when the bailout program runs out in 2018.
    • Germany’s finance minister has so far been reluctant to discuss such a relief, but it appears he now has found a compromise with IMF directors.
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    Audio

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European Finance Ministers Attend Eurogroup Meeting As Greece Bailout Deadline Looms
The finance minister has underestimated the IMF's tenacity. Picture source: Bloomberg

The International Monetary Fund, IMF, has signaled its  willingness to participate in a new loan program for Greece, Handelsblatt has learned from sources close to the discussions. The move would be a victory for German Finance Minister Wolfgang Schäuble, who has insisted on the IMF’s participation in a new bailout plan, but critics decry the deal as window-dressing.

Under the agreement, the IMF would only need to pay out money if Greece can prove its debt to be sustainable. Greece has rejected the deal.

Euro-zone countries are debating debt relief for the southern European country when its current bailout ends in 2018, but the IMF has claimed it has not received enough details on such plans to provide new loans for the ailing nation.

However, the IMF’s general agreement to participate would allow Mr. Schäuble to calm skeptical German parliamentarians by saying the IMF was on board.

The latest compromise would provide Greece with some room to breathe, just ahead of a looming default in July when the country has to repay some €7.3 billion ($8.20 billion) in maturing loans. Europe’s bailout fund, ESM, would be able to pay out the next loan tranche, winning time to sort out the pressing questions over long-term debt relief in the process.

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