Varoufakis: Guest Post on IMF Leak to Greek debt – SPIEGEL ONLINE

Although currently spoken mainly behind the scenes: The negotiations on the loans for Greece are not yet complete. On Saturday the Wikileaks published the transcript of an internal conference call from the International Monetary Fund (IMF). In the discussion of senior IMF staff is clear as odds are donors with each other and how far a real solution for Greece is still away. (Read our analysis here).

Former Greek Finance Minister Yanis Varoufakis feels the time of a year ago, recalls when he takes on the Greek side with IMF, EU Commission and Euro countries negotiating loans for its insolvent country. In his opinion, the SPIEGEL ONLINE published, he fears a showdown between Greece and the donors in the summer.

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    Yanis Varoufakis, Born in 1961, was from January to July 2015 Finance Minister of the Greek Syriza government. The economics professor has previously taught in Athens, Austin and Sydney.


 

Ever since the first Greek bailout in May 2010 decided the International Monetary Fund (IMF) has broken its own supreme rule not to fund insolvent states. The IMF leadership experienced since an uprising of their employees who insist on an exit strategy. If the EU by the Greek government continues to deny the necessary debt relief, they argue, the IMF should get out of the rescue program. Six years later, this stalemate continues between the IMF and EU. The Greek gross domestic product (GDP) has fallen by one third, the hopelessness so great that real reforms are more difficult than ever.

I Poul Thomsen, the European head of the IMF, met in a Paris hotel in February 2015 – shortly after I was Greek finance minister. He seemed even more interested when I enforce a debt. “At least 54 billion euros of Greek debt, that were left after the first rescue program, should be written off immediately,” he said. “In exchange for serious reforms.”

The music was in my ears, I wanted to talk about “serious reforms”. However, the discussion never got going because German Finance Minister Wolfgang Schäuble tape any discussion of debt relief.

The view of the IMF to the Greek crisis

What we now learn new things about this saga from the leaked dialogue between Thomsen and Delia Velculescu, the IMF representative in Greece? From the perspective of the IMF, the situation is currently as follows:

• The EU Commission hopes for a more apparent solution at the IMF spring meeting in mid-April, so that the EU leaders (again!) can celebrate the end of the Greek crisis.
• the IMF will prevent this, because he is no longer prepared to support another bill solution that fails to fulfill its supreme rule
• the Greek government willing to submit to new austerity demands of the IMF. These amount to 2.5 to 3 percent of GDP. These include pension cuts, higher VAT on basic food and salary cuts in the public sector. Promises they do not want to do but because the EU Commission “gentler” Austerity is still a prospect. This is a false promise.
• The IMF is angry at the Commission, because the EU internal projections indicate even tougher measures for the future as the IMF.
• the IMF regretted having set a common position with the Commission before the Commission began to lead the Greeks astray.
• to force Europeans to reconsider their decision, Greece must first stand on the precipice again (ie shortly before insolvency).
• Because of the British EU referendum on 23 June estimates of the IMF, that the debt dispute with the Commission shall be suspended until July. Thereafter, as in the past year, again threatening a “Greek crisis”.
• The IMF plans then in July to urge Merkel into a corner. They should be forced to choose what political costs less: continue the Greek bailout program, but without the involvement of the IMF? ? Or the Greek government to provide substantial debt relief
• As long as Merkel selects one of these two options, the IMF is fine out: either he leaves the rescue program, or base of the rescue program is changed by the debt so that it no longer violates the supreme IMF control.

For the uninitiated, it looks like, when turn the dispute between the IMF and the EU Commission only by a few bungled numbers. But the background is highly political and has implications beyond Greece

The IMF is right. The Commission’s figures do not go on. It is hypocrisy that the Commission acts as if she wanted a “austerity light”, while her no to a debt relief means that the Greek government has to achieve a primary surplus of 3.5 percent of economic output in the household. That means even harder Save

The bad arithmetic Commission has political reasons. In a correction Merkel would admit to having given an unsustainable promise 2010 Bundestag: that the insolvent Greece would repay every penny with interest. This admission would now political poison for the ailing Chancellor.

If the IMF numbers better? Thomsen and Velculescu argue for exactly the goal of which I had suggested last year the Troika: a primary surplus of 1.5 percent

An inhuman, unnecessary austerity program

Why did the IMF not supported me in 2015, but now calls on the same number of 1.5 percent? Because they wanted something I would never have allowed: an inhuman, unnecessary austerity program, which seems the Tsipras government willing to accept today.

The IMF package is inhumane because it will destroy hundreds of thousands of small businesses and strengthen the humanitarian crisis. In my opinion, it is also unnecessary because Greece could return to growth by taking the oligarchs targeted and reform public administration.

A monstrously exaggerated but immensely revealing comparison of the IMF logic would so: Would Greece bombarded with nuclear weapons, the economic crisis would thus completed and accept the numbers again “ok” as long as the donors a complete haircut , But if I am right and Greece even without further social decline again on its feet – why does the IMF in 2015 in alliance with the German government to break us

For decades, the IMF has in each country? in which he “sang”, “reforms” promoted by small businesses destroyed and the middle class proletarianized. Would the IMF abandon this scheme in Greece, he would have to admit that the anti-social programs that he has imposed for decades countries around the world, possibly were inhumane and unnecessary.

A war of attrition is in transition

the show Wikileaks publications that there is a war of attrition – between a reasonably numerate villain (the IMF) and a chronic procrastinator (Germany). They also show that the IMF seriously think about it, to put things in July to a decision by bringing Greece to the brink once again – just like in July 2015.

With one exception: this time to Alexis Tsipras not be placed in a tight spot, but the German Chancellor.

If Christine Lagarde, IMF chief followed with ambitions for a political comeback in Europe, the line of their subordinates? How will Chancellor Merkel react to the publication? ? Could the protagonists change their strategies, now that we have gained an insight

While I muse on these issues, I am overcome by a surge of grief: Last year, during our Athens Spring, Greece had at least the weapons against organized incompetence of the Troika. Only I could not use them unfortunately. The result: Europe is increasingly discredited and the Greek people can silently watch as his bleak outlook blacker.

The History of the Greek crisis