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Finance minister Wolfgang Schäuble is reported to cut a deal with IMF chief Christine Lagarde to bail out Greece to avoid problems in Germany's September's elections.

And according to reports Angela Merkel's right hand is talking about creating another European monetary fund so Germany can avoid underwriting its debt in future.

According to German reports Schäuble did a dal with IMF Chief Christine Lagarde last week and they cooked up a new scheme which would see Germany avoid underwtiting Greece's future debt as it continues to require funding due to its failing performance and costs from the 2015 migrant crisis.

A deal reached yesterday in Athens is set to be ratified at another meeting in Malta laster this month and includes labour and energy reforms as well as pension cuts and tax rises, comes exactly six months after the country applied to the IMF and other lenders for debt relief.

The Greek government has bowed to German demands to go after the nation's pensioners with far raging cuts of up to 18 per cent.

The moves comes after the government flew to meet IMF chief Christine Lagarde in Washington and the World Bank two weeks ago as it tries but fails to get itself out of its increasing debt problems.

Greece appears to have capitulated to demands by German Chancellor Angela Merkel to increase its austerity measures, a move that is unlikely to be popular with an already strained population.

Left-wing Greek economist and minister of finance Euclid Tsakalotos told reporters: “There was white smoke.

“The negotiations for a technical deal were concluded on all issues... the way has now been paved for debt relief talks.”