Germany To Greece: No Debt Relief For You

Whether or not the IMF intended to use a Greek credit event to destabilize Europe as the Greek government first alleged, or whether this was "nonsense" as Lagarde responded to Tsipras letter, is irrelevant - ultimately the underlying premise was whether or not Greece gets debt relief, something the IMF has been insisting on since the third bailout package. And as is well-known, it was Germany - not Greece - that stood in the IMF's way.

So after a terse weekend in which relations between Greece and the IMF devolved once again to frigidly sub-zero levels, moments ago Germany chimed in with its position, which can be summed up in another familiar word: "nein".

As Bloomberg reports, citing spokesman Martin Jaeger, "Greek debt relief isn’t on the agenda right now", adding that the "priority is to put Greek budget on sustainable footing." He also said that Greece already has historically low repayment costs on bailout loans, and that "we remain confident that we can achieve progress, though there’s still quite a bit of work to do."

Finally, he said that we "don’t see why we can’t complete review before Orthodox Easter."

Additionally, the German chief govt spokesman Steffen Seibert said in response to reporter’s question whether they discussed IMF-Greece relations Merkel, that Tsipras spoke by phone on Sunday to discuss “a variety of issues." He made it clear that Merkel government position on IMF participation in Greek aid program and debt relief hasn’t changed.

Elsewhere, as we first noted in our summary of the Greek reaction to the leaked IMF letter, Bloomberg writes that "Greece could again face the threat of being pushed into default and out of the euro area if its current bailout review drags on into June and July, according to European officials monitoring the slow progress of Prime Minister Alexis Tsipras’s negotiations with creditors."

Greece still hasn’t cut a deal on pensions, tax administration or its fiscal gap, and other issues like non-performing loans and a proposed privatization fund continue to slow the talks, said the European officials, who asked not to be named because discussions are ongoing. The International Monetary Fund presents another obstacle, they said.


The IMF, for its part, disagrees with the euro area on how Greece needs to cut its budget. With Germany insisting that the fund will eventually have to get on board for the bailout to proceed, officials from the IMF are trying to find ways to pressure Chancellor Angela Merkel to give Greece debt relief, according to a transcript of a purported conversation published by WikiLeaks April 2.

At the end of the day, it will be up to the Greek people, and how they react to this latest scandal although with their assets held under the protective "capital controls" buffer which needs the ECB's continued blessing, we doubt the fireworks of last summer will repeat.