German Finance Minister Wolfgang Schaeuble turned up the heat on the Greek government Thursday, warning in an interview that if Athens and its creditors conclude the second review of the country’s bailout without the participation of the International Monetary Fund then it will be highly unlikely that the German parliament will approve another program to replace the current one.
Speaking to Bloomberg at the World Economic Forum in Davos, Schaeuble said that Greek program was from “its beginning in 2010 based on the participation of the IMF” and that he wouldn’t support a new Greek bailout if the Washington-based organization refused to join the existing program – that will be a sign, he said, that the Greeks are not fulfilling their commitments, and therefore “the program will be ended because the precondition of the program, the basis, is destroyed.”
If the IMF was to withdraw, then the German Bundestag would assume that the program it approved in July 2015 is no longer valid and a new one would have to be agreed. This would need fresh approval from the parliament in Berlin, which, Schaeuble said, is unlikely, reiterating earlier comments to the effect that he would not advise Greece to “try to get the permission of the German parliament” – essentially dismissing Athens’s assessment, that the IMF’s withdrawal would help negotiations along.
German lawmakers, he argued, would contend that since Greek authorities are not able, with all the “flexibility granted by European institutions, to stick to what they have approved, the precondition for a program is no longer there.”
Differences over labor reforms and fiscal targets have stalled efforts by Greece and its creditors to conclude a compliance review of its bailout program.
The IMF has insisted that Greece’s budgetary targets are unrealistic, saying that they could only be met with fiscal austerity which, however, will kill growth.
Given that the review negotiations have essentially frozen, Schaeuble’s comments are an alarm call to the Greek government to push for their swift conclusion and accept the demands made by the IMF.