Brussels, 08/10/2013 (Agence Europe) - The International Monetary Fund (IMF) has set the cat amongst the pigeons again on the first Greek bailout in 2010.
On Tuesday 8 October, the Wall Street Journal published minutes of meetings at which various members of the IMF say the growth projections for Greece were over-optimistic. Swiss national René Weber said: “We have doubts on the growth assumptions, which seem to be overly benign. Even a small negative deviation from the baseline growth projections would make the debt level unsustainable over the longer term.” India's executive director Arvind Virmani warned: “The scale of the fiscal reduction without any monetary policy offset is unprecedented. (It) is a mammoth burden that the economy could hardly bear. Even if, arguably, the program is successfully implemented, it could trigger a deflationary spiral of falling prices, falling employment, and falling fiscal revenues that could eventually undermine the programme itself.' Publicly, the IMF said in June 2013 that the need for direct restructuring of the Greek debt was not obvious back in 2010, but the meetings transcripts show that members of the IMF do not agree. All the participants mention this or are astonished that the option had not been chosen. Brazilian Nogueira Batista said in 2010: “The risks of the program are immense (…). As it stands, the programs risks substituting private for official financing. In other and starker words, it may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece's private debt holders, mainly European financial institutions.”
The European Commission refused to comment on the latest leaked comments from the IMF, referring to its comments in June when an IMF report was leaked stating that the Greek bond write down should have happened earlier. Euro Commissioner Olli Rehn said in June that he had no memory of the then IMF director general, Dominique Strauss-Kahn, recommending any such thing, but he did remember Christine Lagarde opposing it (at that time, she was French finance minister, before becoming Strauss Kahn's successor).
In June, the Commission said that the analysis recommending a writedown of the Greek debt from the outset didn't take account of the inter-connected nature of countries in the eurozone and the risk of a domino effect (see EUROPE 10861). Since the Greek debt is at a largely unaffordable level, the IMF now recommends a full-on approach to reducing the debt burden; but Europe says it does not want to write off any debts at this stage. Greek finance minster Yannis Stournaras said on television on Monday: “I want us to go to a 50-year bond, as that would mean that our debt would be considerably reduced across fifty years.”
In June, irritated at the IMF criticisms of management of the first Greek bailout, the European Commission promised to compile its own report. Nothing has yet been forthcoming. (EL/transl.fl)