A compromise the IMF offered to break the deadlock with Europe over financing for Greece could avoid a renewed crisis in the country in July, a fund spokesman said Thursday.
The International Monetary Fund is not bending its rules to help crisis-ridden Greece, but in fact helping to resolve an impasse over the country's debt, while continuing to insist on debt relief, the spokesman said.
Germany has resisted providing more debt relief, not least because it faces legislative elections in September, nor will it agree to a new loan for Athens unless the IMF also participates.
The impasse has threatened to generate another crisis in Athens, which has a seven billion euro debt payment due in July.
The IMF has offered the possibility of approving a new aid program for Greece, but without releasing any funds until new debt relief steps are offered by Europe.
"Our understanding is that the European partners could go ahead with a disbursement in this situation," spokesman Gerry Rice told reporters of the compromise plan.
While the IMF is pushing to have an agreement at next week's Eurogroup meeting that includes an outline for debt relief as the "first best solution," Rice said the compromise option would "help catalyze financing and debt relief," and would "avoid a destabilizing situation in July."
However, he stressed that the IMF would still insist "on debt relief before releasing any of its funds. It is not in any way a backing down."
"We're hoping there can be an agreement next week. We're making good progress, the differences are narrowing," he said.
The notion was first floated in a recent meeting of Eurogroup finance ministers, and then offered publicly on Monday by IMF Managing Director Christine Lagarde.
It seemed a softening of the fund's position, as it has insisted repeatedly that Greece's debt is not sustainable and would require significant debt relief.
But Rice said, "This is not breach guidelines or bending or breaking rules. I want to push back against that notion."
The fund has used this type of "approval in principle" without immediate disbursement of funds in 19 cases previously, and would simply revive a tactic used previously, albeit not since the 1980s, Rice said.
Using this tactic is better for Greece than having the IMF remain on the sidelines, which could result in an aid program from Europe that does not include much-needed debt relief.