As expected (and as tipped here on Thursday immediately after news broke that an IMF study conducted prior to the imposition of capital controls in Greece suggests debt relief for Athens is necessary if anyone hopes to create some semblance of sustainability), Greek PM Alexis Tsipras is now leaning hard on voters to carefully consider the fact that one-third of the troika has effectively validated the Greek government's position on creditor writedowns. 

"This position was never proposed to the Greek government over the five months of negotiations, wasn't included in final offer tabled by creditor institutions, on which people are going to vote on July 5," Tsipras said in a televised address, making it clear to Greeks that the proposals they are voting on effectively do not reflect the views of the institution that is perhaps the country's most influential creditor. 

"This IMF report justifies our choice not to accept an agreement which ignores the fundamental issue of debt," he added, driving the point home. 

Clearly, this puts Europe, and especially Germany, in a rather unpalatable position. Many EU officials have for months insisted that IMF participation is critical if the Greeks hope to secure a third bailout. The IMF meanwhile, has stuck to a position first adopted years ago (something we've noted in these pages multiple times of late); namely that official sector writedowns will ultimately be necessary if Brussels hopes to finally put the Greek tragicomedy to bed. This means Brussels (and Berlin) will now be forced to choose between IMF involvement (which the EU says is a precondition for a deal) and haircuts (which the EU says aren't possible).

Here's Barclays - a major investment bank - with its own confirmation that the IMF may have assured a No vote over the weekend.

The document basically argues that OSI is a necessary condition in order to secure sovereign solvency with a high probability. This means that before the IMF re-engages in any lending activities with Greece, OSI will be required in the form of NPV debt relief.

The timing of the publication of this report it is very important. Debt relief is something that the Greek authorities have repeatedly demanded; therefore, in a way this report can be interpreted as the IMF backing the Greek government's demands. By extension, it could also be interpreted as supportive of a 'No' vote, which is what the Greek government is campaigning for. 

We agree broadly with the analytical content of the report and the need for further OSI. This is in fact hardly new news. Europe has recognized since November 2012 that Greece needs further OSI to make debt dynamics sustainable with high probability. The IMF advice of an NPV haircut via a debt maturity extension (to 40 years) is in line with expectations.

However, the critical point is that the IMF now requires debt-relief before it engages in a new programme, which confronts Europeans with a tough political decision. Many in Europe, including Germany, considered OSI as a future carrot in exchange for reforms today following good programme execution. Debt relief was conceived as a part of a third programme to be negotiated possibly with a new Greek government.

At the same time, Germany has been adamant about the importance of IMF involvement in any financial support programme for Greece. Thus, Germany will now be confronted with a tough choice: to deliver on the IMF's demand, ie to engage in OSI negotiations in the form of NPV debt relief, or give up on IMF involvement. We believe that there is mounting support across other member states for the OSI discussion, therefore, we believe that Germany may not be able to resist such discussions any longer.