EU officials said that the two sides remained at loggerheads over an IMF demand that Athens be granted significant debt relief and easier surplus targets, meaning that a deal that had been hoped for at a high-stakes ministerial meeting on Monday may now be months away.
Although the Greek government will not face bankruptcy without the €7bn in aid until July, eurozone capitals were racing to strike a deal with the IMF in time for Monday’s eurogroup meeting of finance ministers so that the troubled €86bn Greek bailout programme would not become subject of debate in Dutch or French national elections.
Dutch voters will elect a new parliament next month, while their French counterparts vote in the first round of presidential elections in April.
But ministers are not expected to take any “momentous decisions” on the programme, according to a senior EU official involved in the talks, adding that substantial further technical work and political compromises were needed to secure a deal.
Investors have become spooked about the ongoing stand-off between Brussels and the IMF, sending the yield on a Greek bond due in 2019 above 9.5 per cent this week.
Greece is approaching a crunch point - again. Six years after its first bailout, the government in Athens is looking to its creditors, the International Monetary Fund and the European Commission, for fresh help. Mehreen Khan discusses the latest crisis and what’s at stake for Europe with the FT’s Brussels correspondent Jim Brunsden
Although the eurozone has faced similar cliff edges over Greece in each of the past two years, only to pay out aid without IMF participation, some diplomats fear that rising nationalist sentiment in Europe during the election season could make a similar fudge impossible this year.
A Germany-led group of eurozone governments has so far refused to yield to IMF demands that capitals spell out further debt relief measures for Greece, an idea which is anathema to German and Dutch voters, but has also faced domestic pressure to keep the IMF on board. The IMF is viewed as a more credible bailout monitor than their counterparts in the European Commission.
In an effort to keep the fund in the programme, EU and IMF monitors are working with Athens to secure the outlines of a potential accord on close to €4bn of tax and pension reforms that the fund says are needed for the country to hit its current surplus targets.
Should an outline be agreed, it would allow teams of EU and IMF officials to return to Athens to resolve what has been one of the major sticking points in the talks.
Even if a deal can be unlocked on tax and pension reforms, eurozone ministers face further difficult talks with the IMF over debt relief.
IMF analysis ignores what sets eurozone members apart from other countries
Wolfgang Schäuble, Germany’s finance minister, has made clear to his counterparts that he will not seek parliamentary support for unblocking further aid tranches to Greece without the IMF on board.
While the July deadline gives eurozone officials some room for manoeuvre, there are also concerns in capitals about recent market turbulence and fears that the political window for a deal could close if the Trump administration seeks to shift US policy at the IMF.
“Is it necessary that we very rapidly reach an agreement? No,” said the EU official, adding that no additional finance ministers’ meetings were being considered until next month’s regularly scheduled meeting. Still, “in the present state of the world it’s preferable to come to an conclusion sooner rather than later”.
A Greek government spokesman said on Thursday that Athens’ aim at Monday’s meeting was to define “the central axes” of a possible deal, but that the country did not want to accept “even one” additional austerity measure.