Julian Assange. (photo: Yui Mok/PA)
Destroy
Greece: IMF and Europe Disagree on the Method!
By Julian Assange, WikiLeaks
04 April 16
Today,
2nd April 2016, WikiLeaks publishes the records of a 19 March 2016 teleconferencebetween
the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen,
the head of the IMF’s European Department, and Delia Velkouleskou, the IMF
Mission Chief for Greece. The IMF anticipates a possible Greek default
co-inciding with the United Kingdom’s referendum on whether it should leave the
European Union (‘Brexit’).
“This
is going to be a disaster” remarks Velkouleskou in the meeting.
According
to the internal discussion, the IMF is planning to tell Germany that it will
abandon the Troika (composed of the IMF, European Commission and the European
Central Bank) if the IMF and the Commission fail to reach an agreement on Greek
debt relief.
Thomsen:
“Look you, Mrs. Merkel, you face a question: you have to think about what is
more costly, to go ahead without the IMF–would the Bundestag say ‘The IMF is
not on board?’, or [to] pick the debt relief that we think that Greece needs in
order to keep us on board?”
Remaining
in the Troika seems an increasingly hard sell internally for the IMF, because
non-European IMF creditor countries view the IMF’s position on Greece as a violation
of its policies elsewhere of not making loans to countries with unsustainable
debts.
In
August the IMF announced it would not participate in last year’s €86 billion
Greek bailout, which was covered by EU member states. IMF Chief Christine
Lagarde stated at the time that the IMF’s future participation was contingent
on Greece receiving “significant debt relief” from creditors. Lagarde announced
that a team would be sent to Greece, headed by Velkouleskou.
Thomsen
said internally that the threat of an imminent financial catstrophe is needed
to force the other players into a “decision point”. For Germany, on debt
relief, and In the case of Greece, to accept the IMF’s austerity “measures,” —
including raising taxes and cutting Greek pensions and working conditions.
However the UK “Brexit” referendum in late June will paralyse European decision
making at the critical moment.
“I am
not going accept a package of small measures. I am not…” said Thomsen. “What is
going to bring it all to a decision point? In the past there has been only one
time when the decision has been made and then that was when [the Greeks] were
about to run out of money seriously and to default. […] And possibly this is
what is going to happen again. In that case, it drags on until July, and
clearly the Europeans are not going to have any discussions for a month before
the Brexits…”
Last
year Greek Finance Minister Tsakalotos accused the IMF of imposing “draconian
measures,” including on pension reform. While Velkouleskou concedes in the meeting
that “What is interesting though is that [Greece] did give in… they did give a
little bit on both the income tax reform and on the…. both on the tax credit
and the supplementary pensions.”
But
Thomsen’s view is that the Greeks “are not even getting close [to coming]
around to accept[ing] our views.” Velkouleskou argues that “if [the Greek
government] get pressured enough, they would… But they don’t have any incentive
and they know that the Commission is willing to compromise, so that is the problem.”
Velkouleskou:
“We went into this negotiation with the wrong strategy, because we negotiated
with the Commission a minimal position and we cannot go further [whereas] the
Commission is just starting from this one and is willing to go much further.
So, that is the problem. We didn’t negotiate with the Commission and then put
to the Greeks something much worse, we put to the Greeks the minimum that we
were willing to consider and now the Greeks are saying [that] we are not
negotiating.”
While
the Commission insists on a Primary Government Budget Surplus (total tax minus
all government expenditure excluding debt repayments) of 3.5%; the IMF thinks
that this target should be set at 1.5% of GDP. As Thomsen puts it, “if [Greece]
come around to give us 2.5% [of GDP in tax hikes and pension-wage-benefits
cuts]… we should be fully behind them.” — meaning that the IMF would, in
exchange for this fresh austerity package, support the reduction of the Primary
Surplus Target imposed upon them from the 3.5% that the European Commission
insists on to 1.5%.
These
targets are described as “very crucial” to the IMF. The IMF officials ask
Thomsen “to reinforce the message about the agreement on the 2.5%, because that
is not permeating and it is not sinking very well with the Commission.”
At one
point, Velkouleskou refers to an unusual solution: to split the problem into
two programs with two different targets: “The question is whether [the
Europeans] could accept the medium term targets of the Commission, for the
purposes of the program, and our targets for the purposes of debt relief.”
Thomsen further explains that “They essentially need to agree to make our
targets the baseline and then have something in that they hope that will
overperform. But if they don’t, they will still disburse.”
The
EWG [Euro Working Group] needs to “take a stand on whether they believe our
projections or the Commission’s projections.” The IMF’s growth projections are
the exact opposite of the Commission’s. The Commission projects a GDP growth of
0.5%, and the IMF a GDP decline of 0.5% (even if Greece accepts all the
measures imposed by the IMF).
C 2015 Reader Supported News
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