Barclays Warns "Grexit" May Return This Summer While Tsipras "Demonizes" IMF
By Tyler Durden
As we predicted last week when Wikileaks released an IMF transcript which suggested trubulent times may be ahead for Greece,
Diplomatic pandering aside, Tsipras rebuke undercut months of patient efforts by Tsipras himself and Finance Minister Euclid Tsakalotos to rebuild lenders’ trust following last summer’s turbulent events which culminated with a bank run, capital controls and a banking system that relies on the ECB for its daily existence.
As Reuters writes, it also shone a light on a complex, three-dimensional chess game the IMF is playing to try to make Greece accept painful reforms of pensions, taxation and bad loans while pressuring Germany and its allies to grant Athens substantial debt relief.
“Put simply, the IMF’s position is that the Greek economy is in worse shape than rosy EU forecasts suggest, and that a necessary relaxation of fiscal targets must be balanced by greater debt relief from euro zone lenders.”
Because apparently it is news to someone that while Europe was pretending it was helping Greece (when it was merely making sure none of the bond held by the ECB were defaulted on), Greece was pretending to reform.
Of course, since Greek reform in any measurable way is unachievable, there was the question of whether it makes sense to chop off some of the debt it can never repay, as a confirmation of what a great job Greece had been doing (or perhaps as impetus to force it to actually do something). By antagonizing the IMF – the only part of the Troika that was pushing for a haircut – that also is now off the table.
Germany, the biggest creditor, is the most reluctant about major debt restructuring. Its parliament insists on a continued IMF presence to enforce budget savings and minimize the need for stretching out loans and freezing interest payments.
“The bottom line is the debt will not be repaid in our lifetime,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington.
Or ever.
“The IMF is gearing up for new clients in the emerging economies. That is not best done by being soft on Greece. They won’t go to the (IMF) board to approve participation in a third Greek bailout without something they think is tough and credible,” he said.
Brussels contends that both the economy and Greek compliance with the bailout programme are better than the IMF thinks, hence the first review should be concluded soon, allowing Athens to access the next 5 billion euros ($5.70 billion) of loans.
Reuters conclusion: “How the three-way tug-of-war between the IMF, Greece and Berlin will play out remains uncertain. The sequencing will be tricky, but no side seems to have an interest in walking away.”
Ironically, Greece finally has some true leverage over Germany as Merkel is more dependent now on Greece to act as Europe’s gatekeeper than she was during last year’s crisis over a …read more
Source: Barclays Warns "Grexit" May Return This Summer While Tsipras "Demonizes" IMF
