Doubts over IMF role in Greek bailout unless debt relief agreed

Doubts about the IMF's participation in a third bailout package for Greece emerged on Thursday as an IMF official said the Washington-based fund would only sign up to a bailout programme once an agreement on debt relief is reached.

As the IMF’s chief negotiator on the Greek bailout joined officials representing other euro zone creditors in Athens, the fund said that reform measures were also needed on the Greek side on a “comprehensive set of reforms”.

The renewed doubts about the IMF’s participation came as Greek prime minister Alexis Tsipras challenged his Syriza party to hold an internal referendum on the third Greek bailout package on Sunday, increasing speculation that a snap election could be in the offing.

Addressing Syriza's central committee in Athens at a specially-convened meeting, Mr Tsipras said the government had made "difficult choices" to avoid bankruptcy for the country. "Leaving the euro without any possibility of economic support, and without foreign exchange reserves, would mean a huge devaluation, harsh austerity and further recourse to the International Monetary Fund for support", he said. "Anyone who doesn't accept this is either wilfully blind or is hiding the truth."

He challenged those within the party who have criticised the latest bailout deal to speak out: “Anyone who wants a difference government or a different premier should say so. Those who believe this is the worst memorandum of all should say so now.”

The outcome of the ballot will be widely seen as a statement on Mr Tsipras’s leadership, though the party could also choose to deliver its verdict in September, once negotiations on a third bailout are included.

Mr Tsipras said on Wednesday that elections could be called if he does not have a parliamentary majority.

Up to a third of Syriza MPs, clustered around a sub-group known as the Left Faction, have been strongly critical of Mr Tsipras’s decision to sign up to a third bailout agreement.

Following months of tortuous negotiations and a national referendum, the Greek prime minister struck an 11th-hour deal with creditors on July 13th which will see Greece receive approximately €86 billion in funds over the next three years from European lenders and the IMF in exchange for reforms.

Negotiators from the European Central Bank, European Commission, IMF and the ESM fund are in situ in Athens where discussions on the detail of a third bailout package for Greece, including the reform measures that need to be enacted in exchange for funds, have begun.

With an ECB payment of €3.2 billion looming on August 20th, the negotiators have less than three weeks to agree a memorandum of understanding with the Greek authorities. If a deal is not agreed, Greece could be forced to seek another bridge loan to enable the country to make its ECB payments.

With capital controls still in place in Greece, much of the negotiations are focusing on the Greek banking sector, which is now believed to need up to €25 billion in recapitalisation.