On the question of the IMF, we have an answer from Ambrose Evans-Pritchard
IMF has betrayed its mission in Greece, captive to EMU creditors
The IMF’s Original Sin in Greece was to let Dominique Strauss-Kahn hijack the institution to save Europe’s banks and the euro when the crisis erupted, dooming Greece to disaster.
Mrs Lagarde must stop playing the role of a diplomat. She must take off her European hat and speak instead for the organisation she leads and for the world.
She must confront the EMU creditors head on and in public. She must tell them, in blunt language, that they share much of the blame for the current impasse.
She must make it clear to them that Greece needs sweeping debt relief – as a matter of economic science, whatever the morality – and that the refusal of the creditors to face up to this elemental fact is now the chief impediment to a solution. And she should tell them that the IMF will no longer play any part in their deceitful charade.
If she does not do so, and if the lack of leadership by Europe’s political class leads to a catastrophic denouement on every level, then let it be on her head too.
From the Financial Times editorial:
‘Previous rescue attempts provide a lamentable example. The first, in 2010, allowed no space for debt forgiveness. Instead, over €200bn was invested in making Greece’s creditors whole. Athens avoided default but its economy gained no relief. The austerity insisted upon by its creditors drained demand from an economy already in freefall.’
An answer from James K.Galbraith:
Bad Faith. Why Real Debt Relief Is Not On The Table For Greece
The original crime in the Greek affair, Legrain said, was committed in May 2010, when it became clear that the country was insolvent. At that time, the IMF staff was convinced that Greek debts must be restructured, and that debt relief was not only necessary but also just, given that reckless borrowers are always matched to reckless lenders, and that lenders are compensated, in part, for the risk of loss.
Restructuring did not happen. Instead, a trio of Frenchmen — at the IMF, at the European Central Bank and at the Elysée, and backed by Angela Merkel — decided to pretend that Greece’s problem was merely temporary, that there was a larger financial crisis to be warded off, and that the largest bailout in history should be directed not to save Greece, but to off-load the exposure of French and German banks onto all the European states, with Germany’s taxpayers taking the largest share.
Why did the IMF get into the act, making its largest loan in history (32 times Greece’s quota) over the reservations of its staff and the objections of many non-European members? Because the Managing Director at the time, Dominique Strauss-Kahn, wanted to become President of France.
At the same time, the European Central Bank under Jean-Claude Trichet bought up some 27 billion euros in Greek bonds, thereby raising their price. Why did Trichet do this? To support the original lenders, once again in large part the French banks.
In so doing, the European powers were able to avoid imposing losses on the large banks. And by his actions, Trichet locked the ECB into a refusal to accept losses on Greek bonds as he stretched, if not broke, the legal mandate of the European Central Bank.
The time has come for Tsipras to accept the deal from Europe
The offer from Greece’s creditors is better than the alternative
After all the usual FT agitprop, carefully disguised as neoliberal rationalism/apologetics we are left with this act of public shaming, redolent of the old school tie:
‘Without friends or finance, the Greek prime minister is left with just three possible cards to play: one technical, a second principled and the last utterly dishonourable.’