Decoding the IMF: Greek deal doomed, exit likely

[J_J_]

No to the rescue deal, says the left. Abstain, say others. Vote yes while declaring it’s been done at gunpoint, says Alexis Tsipras in a live TV interview. But step away from the argument, bitter as the black coffee served in the parliament’s canteen, and the bigger picture is: the deal will pass, Syriza will vote for it.

Step back further and take in the implications of the IMF’s secret report, leaked yesterday, into the dynamics of Greece’s debt. The IMF says – after the weeks of dislocation caused by the relentless bank run and the capital controls – that the austerity deal is pointless. Greece needs a massive debt write-off or large upfront transfers of taxpayers money from the rest of Europe. It needs a 30 year grace period in which it will stop repaying the loans.

Yet the entire deal done on Sunday night was premised on not a single cent worth of debt relief. Vague commitments to “reprofile” debt – pushing repayment times backwards and lowering the interest rates – were all Angela Merkel could be persuaded to do.

What this means is very simple: the third bailout agreed in principle on Sunday night is doomed to fail. First because the IMF cannot sign up to it without debt relief; second because, without debt relief it will collapse the Greek economy. This is even before you factor in issues like mass resistance to its details, or the total lack of enthusiasm for execution of the deal by the Syriza ministers who will have to do it.

- See more at: http://blogs.channel4.com/paul-mason-blog/greece-crisis-austerity-deal-pointless/4197#sthash.gwurw61D.dpuf

[lumberjack_jeff]

1. I wish I understood more about this.

But Greece's creditors appear to be demanding two things:
1) prompt repayment of the entire debt
2) through breakaway growth of the Greek gdp.

Those are mutually exclusive demands.

Maybe the creditors are, collectively, ignorant greedy fools, in which case I know all I need to know.

[unblock]

2. actually, i'm quite heartened by this, as it means europe must write-off some of the debt

greece's creditors have resisted debt forgiveness or even debt extension as the rules would require them to write off the debt, which would have an impact on their own budgets.

however, greece's debt is clearly "bad" and some large portion of it needs to be written off, one way or another. the focus should be on how much can be recovered.

what the imf is now saying is:
(a) if there's no deal, greece will obviously default and europe will have to write the debt off.
(b) if there is a deal, the imf will only sign on if some of the debt gets written off.

either way, the fantasy of getting away without writing anything off has been taken off the table. now that the fantasy alternative doesn't exist, europe will have no choice but to do something that at least makes more sense than the crazy plans talked about thus far this round.