Week 27: Prat – the IMF

by George_East on July 6, 2015

prat_iconLast Week’s Prat of the Week goes to the International Monetary Fund for belatedly accepting that Greece needs debt relief if it is to recover

The Syriza government in Greece was elected in January. Its mandate from the Greek people was to renegotiate the terms of the bail out package with the Troika. This is a bail out package that has turned Greece’s economy from a disaster at the time of the financial crisis to an absolute train wreck with no hope of exit. GDP in Greece has fallen by more than a quarter since 2008 and the debt to GDP ratio has gone from just over 100% to 175%. All of the projections that the Troika made back in 2009 have proven to be hopelessly wrong.

It has been obvious for a very long time that if Greece is to have any hope of recovery it needs a breathing space to do so.   It may be that recovery within the Euro is, in fact, all but impossible given the need for internal wage deflation if competitiveness is to be restored. However, on any view debt relief is needed too – the bail out of Greece has in fact been a bail out of banks who lent to Greece. For every Euro recklessly borrowed, there was a Euro recklessly lent.   Yet it is the Greek people who have been made to suffer, not the creditors, in the form of northern European bankers.

Syriza said this from the beginning – that the terms imposed by the Troika effectively prevented any hope of recovery taking place. This was not only denied by the creditors but used as an example of how reckless and out of touch with reality the Greek government was. Last week, after Prime Minister Alexis Tsipras called the referendum, this mutated into a thinly disguised attempt by the Troika and northern European governments to bring down the elected government of Greece (just as they had previously done with the government of George Papandreou in 2011 when he had the temerity to suggest a referendum).

The IMF have been part of this throughout – the only part of the Troika which is not a European institution. Yet finally last week the IMF relented and recognised the obvious – that it was impossible for Greece to recover without debt relief. On Thursday the IMF in a report said that the Greek public finances were just not sustainable without debt relief and that €50 Bn was required by way of aid if there was to be a hope of keeping Greece afloat over the next three years. If this report had been available earlier then the referendum might not have been necessary because the rest of the Troika would not have been able to ignore it.

By failing to publish this earlier the IMF has contribute to the grim experience of the Greeks over the past week, with capital controls and the rest. The IMF should (and probably did) know better. In some ways this was an act of villainy. However, unlike the rest of the Troika and nearly all of the rest of the EU governments the IMF has finally stated the obvious. For that reason the report (however late) is still to be welcomed as it provides Greece with some hope that a deal might still be doable on realistic terms. As such its late publication is, with a huge benefit of the doubt, more an act of prattery. It is for that reason that the IMF are last week’s winners of our Prat of the Week Award.

{ 4 comments… read them below or add one }

Dan Stasi July 6, 2015 at 11:28 pm

So you don`t think Greece itself is in any way responsible for its own actions?

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George_East July 7, 2015 at 6:13 am

Er, I said their economy was a disaster at the time of the economic crisis. But it’s been made so much worse by the medicine applied. Killing the patient is not a form of cure.

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John Stone July 7, 2015 at 6:22 am

Grow up Dan. Of course we all know that Greece is in significant part responsible. The point is that Germany and The Commission are *equally* responsible for bending the rules to get Greece and other countries into their project in the first place so that they could sell them German goods and loans at a discount. Playing hardball now while a Eurozone economy effectively collapses because they don’t like the fact that the people don’t want penury and voted in a bunch of lefties to represent them is a complete fucking nonsense and shows utter contempt for democracy.

The Greeks have put their faith in Syriza, and rightly in my view.

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Mike Killingworth July 7, 2015 at 12:40 pm

The neo-liberals, wherever they are, do indeed have contempt for democracy – and any other behaviour which doesn’t fit in with their agenda of concentrating wealth in ever fewer pockets.

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