Brussels, 07/06/2013 (Agence Europe) - The troika of lenders to Greece (European Commission, European Central Bank and International Monetary Fund) seems to have been given a migraine this week by the Greek recovery programme, blaming each other for errors over the past three years. Following criticism of the European Commission by the IMF on Wednesday and a diplomatic response from the Commission on Thursday, Euro Commissioner Olli Rehn piled in on Friday, commenting at a conference on economic issues in Helsinki: “I don't think it's fair and just for the IMF to wash its hands and throw the dirty water on the Europeans.”
The IMF pointed out a series of weaknesses in management of the Greek crisis, criticising its troika partners. It highlighted skills shortages in Europe and disagreements between eurozone members, along with the eurozone's postponing of the Greek bond writedown that the IMF wanted to see earlier in the process. Rehn pointed out: “I do not recall Dominique Strauss-Kahn calling for an early restructuring of Greek debt, but I do remember Christine Lagarde opposing it”. Strauss-Kahn was the former head of the IMF, replaced by former French economy minister Christine Lagarde.
Former IMF economist Simon Johnson comments in Bloomberg: “It is the French and German governments that should be held responsible for the severity of the depression in Greece -- and for the excessive degree of hardship imposed on vulnerable people throughout the troubled periphery.” Former head of the Eurogroup, Jean-Claude Juncker, says (according to the MNI agency) that the European Commission's economic forecasts for Greece had “no link with reality and were not based on scientific considerations,” but he didn't blame anyone for that.
In the midst of negotiating right now with representatives of the troika, the Greek government is trying to ease tension, with the Greek prime minister simply stating that he had corrected the IMF's efforts since he came to power a year ago.
IMF recommends Greek debt be tackled head-on. The IMF progress report on the Greek programme, published on Thursday, says there is a €4 billion shortfall in funding that will emerge after the summer of 2014. Budget targets for 2013 are expected to be reached, but the IMF does not at this stage see that there will be room for any relaxing of the austerity drive as a result of exceeding of the budget targets. The Commission agrees with the IMF about this (see EUROPE 10860). The IMF talks of highly disappointing progress in reforming the country's tax office and the still too slow progress in privatisation. At present, domestic demand is not being backed by the banks, which have taken advantage of their bailout to pay off the debts to the ECB rather than funding the real economy, where there is a tightening credit crunch. Debt sustainability is also a worry for the IMF, which says that the growth forecast will not materialise if investors are not won over by a credible policy for dealing with the debt: “As noted at the last review, should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, and strong programme implementation by the Greek authorities notwithstanding, a more front-loaded approach to debt relief would need to be considered.” Germany and Finland have both said 'no' this week. Finland has negotiated guarantees for its share of the loans. (EL/transl.fl)