Greek deal 'unimaginable' without departed IMF, warns Jeroen Dijsselbloem

By Peter Spence, Economics Correspondent 12 June 2015

The Euro group chief has warned that progress cannot be made without the participation of the IMF

Eurogroup chief Jeroen Dijsselbloem Photo: AP Photo/Geert Vanden Wijngaert

Negotiations between Greece and its creditors cannot possibly make progress without the inclusion of the International Monetary Fund, the Euro group's chief has warned.

Jeroen Dijsselbloem said that a debt deal would be "unimaginable" without the IMF, "because it needs to have proper content and if it has proper content, the IMF will also participate".

The IMF's technical team left Brussels, where talks were being held, for Washington on Thursday. Gerry Rice, a spokesman for the IMF, said that the discussions were "well away from an agreement".

The news knocked the Greek stock market on Friday morning, which lost much of the ground it had gained on hopes that tensions had thawed.

Mr Dijsselbloem's comments came as Greece submitted a new proposal to its lenders, the Financial Times reported, citing an unnamed Greek official.

Athens's proposals reportedly included debt restructuring, but not pension reforms, an element the IMF had pressed hard for.

The plans are said to include "low" austerity targets for next year, indicating that they might fall shy of the 1pc primary surpluses demanded by Greece's creditors.

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Mr Rice insisted on Thursday that the IMF never leaves the negotiating table, but the withdrawal of the fund's technical team from Brussels, along with the departure of Greek negotiators, has unnerved investors.

Mr Dijsselbloem said: "If the IMF walks out, which they won't I'm sure, then part of the programme's financing will be gone and then we no longer have a base."

"The IMF's involvement is indispensible," he said, adding that "if the Greek government isn't willing to take difficult measures, even if they're unpopular, then Greece will never be saved".

Greece has until the end of June before its current bail-out programme expires. If it cannot agree a compromise with its trio of lenders, then it will likely face default.

"We've repeatedly explained to the Greeks how little time there still is," Mr Dijsselbloem said.

Greece has already missed one €300m (£220m) payment to the IMF, opting to roll together its obligations into one €1.6bn payout due before July.

Jean-Pierre Durante, of Pictet Wealth Management, said: "Unless an agreement is reached with its creditors very soon, Greece will probably miss the consolidated payment to the IMF due at the end of this month.

"Even if a deal is concluded in the coming days, it will probably be limited to the release of the outstanding €7.2bn from Greece’s current bailout programme."

The Eurogroup meeting due next Thursday is considered a "final deadline" for a deal by many analysts. But staff at Nomura said that "it is possible that last-minute talks could extend beyond that date, perhaps at the latest until the June 25 summit in Brussels".

Mr Durante added: "This would just be a temporary solution: agreement on a third bailout will be needed for Greece to continue to meet repayments through the rest of this year and beyond."

The European Commission has insisted that the IMF is still involved in the ongoing talks. Margaritis Schinas, a commission spokesman, said: "The IMF ... themselves say that they remain full engaged with Greece."

Jean Claude-Juncker, president of the European Commission, said that "a deal is necessary in the coming days".

Speaking on French radio, he said "negotiations will start again, first at a technical level, then a political one". He added that "a deal is necessary in the coming days".

Greek deal 'unimaginable' without departed IMF, warns Jeroen Dijsselbloem - Telegraph