Date: 17 Feb 2017, Economics and Finance
Question setter: Mettletest Panel

IMF Greek Bailout

Will the IMF commit new funds to the Greek bailout before the end of March 2017?


Response:


Answer: No
Confidence level: 6%
Mean confidence level (all requests): 44.20%

Justification:
The IMF would have to break their mandates to provide funds for Greece. Their own assessments are that Greece could not achieve a primary surplus of 3.5% now or for any sustained period. This effectively means that there is little prospect of a recovery of fortunes within the IMF's normal timescales and Lagarde has said she cannot make exceptions for any particular country. The 3.5% figure exists to allow the EU a rationale to continue bailing Greece out. The fear of the disruption if they do not is too great, so hope triumphs over experience. The IMF may be posturing, to wring concessions from the EU and Greece on the terms of debt relief - some lengthening of bond terms, say - and on further austerity measures. Yet, these really may not be politically possible. EU electors are unsympathetic to further taxes being thrown Greece's way. Both Germany and Holland have said the will pull out if the IMF does and their elections loom. Greek GDP fell last quarter, showing their struggle to achieve any growth under "punitive" austerity measures. Greek bond markets have sniffed the danger. Expect default and a crash out of the Euro when the IMF refuses to pay.

Outcome: No
Score: 6
Mean score (all respondents): 44.20

Expert opinion:


Answer: Yes

Selected Expert Answer from Mettletest Panel:
If the IMF do not commit, Greece will likely default. This is what the Eurozone partners want to convey. Germany and Holland have said that they will not contribute to €86bn bailout without the IMF. It would be difficult for them to do so in their election year. It would infuriate too many voters. But the IMF are not supposed to be involved in long term ongoing lending, without prospect of recovery in the receiving country. The head, Christine Lagarde has said they cannot make exceptions and that she does not believe Greece will achieve the growth required. Recent GDP falls support her view. Her solution is debt relief, which the EU nations will not countenance. So Greece is mired. However, the IMF will not want to instigate a new global financial crisis, despite extreme reservations about defying their own mandate if they commit funds to the bailout. So, all sides want to find a face-saving compromise that allows the situation to drift on. A fudge will be found and the IMF will put in the money to avoid Greece defaulting, dropping out of the Euro and precipitating an EU disaster that reverberates around the world.

Answer: Yes

Selected Expert Answer from Mettletest Panellist:
Greece is moving closer to a deal that would secure new loan disbursements.. Greek Finance Minister, Tsakalotos, Dijsselbloem and the European Central Bank made good noises that they had narrowed their differences. Bond markets rallied to show that the markets were more confident. Meanwhile the IMF has been granted a look at the Greek books to determine if they can justify their contribution. if Greece has complied with a second batch of reforms agreed under the current bailout.Then it looks like Greece will have to agree an extra €1.8bn of reforms this year and next to get paid. The broader tax base and pension hits required for this are exactly what Tsipras has been branding unacceptable.
There is still horse trading to be done and the justifications are predicated on convenient myths about possible growth in Greek GDP and primary surpluses. Nevertheless it is felt to be in nobody's interest to cause a global financial crisis, so compromises will be made.


Outcome: No

Comment on outcome from Mettletest Panellist:
No decision was taken by the end of March. While the most likely outcome is still that a compromise will be reached before July, there is as little certainty as ever. The latest target date for an agreement is Friday 7th April, when the euro zone ministers meet in Malta but gaps remain between Greece and its creditors. In particular, Greece appears to have rowed back on timings for pension cuts, so the IMF is now seeking further labour reform negotiations before sealing a deal. There is no conclusion yet.