BUSINESS

Sixth tranche from IMF in doubt

By Tom Ellis

The sixth tranche of Greece?s bailout from the International Monetary Fund is now in doubt following the unexpected call by the government in Athens for a referendum on the October 27 eurozone deal.

The IMF, which was completely taken aback by the announcement, believes that the new climate of prolonged uncertainty renders the Greek debt unsustainable, according to sources.

Given the funding conditions in the IMF charter that require a clear horizon for the next 12 months, the share of the 8-billion-euro tranche that would come from the IMF cannot be disbursed.

A recent IMF report had made clear the difficulties regarding the handling of Greece?s debt, but after the decision in Brussels last week, the Fund?s Managing Director Christine Lagarde appeared willing to recommend the continuation of the country?s funding.

However, Monday?s developments are making it ever more likely that the next IMF board meeting will result in a decision not to disburse the sixth tranche, regardless of what the European Union does.

There were no statements from the IMF on Tuesday, but World Bank President Robert Zoellick branded the move a risk. ?To me it looks like a roll of a dice,? he said in a briefing with journalists. Lagarde will meet Papandreou in France on Wednesday at the G-20 meeting in Cannes.

At the same time the United States insisted on the full implementation of the eurozone agreement for a 50 percent haircut for private bondholders. A White House statement on Tuesday branded the prime minister?s referendum initiative a ?shock? decision.

Similarly, the Institute of International Finance (IIF) expressed its intention to proceed with negotiations with all parties involved in the October 27 agreement. The Institute?s Director General Charles Dallara spoke with Greek Finance Minister Evangelos Venizelos on Tuesday on the phone.

?We will work closely with the Greek authorities, euro-area officials and other relevant parties to agree on, finalize and move toward implementation of the details of the voluntary private sector involvement,? the IIF reaffirmed on Tuesday.

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