IMF: need euro zone Greek financing for next tranche

Reuters News
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Posted: Jun 20, 2011 11:26 AM
IMF: need euro zone Greek financing for next tranche

By Daniel Flynn

LUXEMBOURG (Reuters) - The International Monetary Fund said on Monday it will have to be sure Greek reforms are on track and will be financed by the euro zone, before the lender can pay out its part of the next aid tranche for Athens.

"For a successful review of the existing program with Greece, which means approval of a new disbursement, it requires the IMF's executive board to conclude that the program is on track and that it is financed," acting IMF chief John Lipsky told a news conference.

The Greek parliament is to vote on June 28 on a package of reforms and austerity measures to get Athens back on track after it missed fiscal consolidation targets agreed with the IMF and the euro zone under a 110 billion euro bailout last year.

To avoid default, Greece needs the next 12 billion euro tranche of that EU/IMF bailout by mid-July, when it has to redeem its bonds.

"On track means that the Greek authorities have agreed on a package of measures that... would put the program on track," Lipsky said after talks with euro zone finance ministers.

But he added that the euro zone also has to guarantee that it will continue to finance Greece.

"We will all require assurances that the program is financed and that involves assurances from our Eurogroup partners that adequate finance is available.

"That needs to be done before we can move forward and we are hopeful that those conditions will be met with alacrity."

Euro zone finance ministers are already discussing a second bailout program for Greece that would run from 2011 to 2014 and could amount to 120 billion euros, counted together with about 30 billion euros of revenues from Greek privatization.

Lipsky noted however, that the IMF was not in talks with Greece on a new financing program, but was focusing on getting the country back on track within the current plan.

"We are discussing the existing program and what is needed to put it back on track," Lipsky said.

"We are not negotiating a new program. There always exists that possibility, but there has been no request from the Greek authorities to negotiate such a new program," he said.

Lipsky noted that missing some targets by Greece was only to be expected given the tough situation it started from.

"We all know that the starting position of the Greek economy... was exceedingly difficult...," he said.

"In those circumstances, not only given the situation in Greece itself, but the situation of the global economy, it's almost inevitable that there will need to be what I call mid-course corrections in a program like this," he said.

"In this case, the mid-course corrections are not trivial. We could list a whole host of reasons, but it is easier simply to focus on what is needed to be done to put it back on track," Lipsky told the news conference.

(Additional reporting by John O'Donnell, writing by Jan Strupczewski, editing by Rex Merrifield and Anna Willard)