Showdown! In Leaked Letter IMF Tells Germany “Debt Relief For Greece Or IMF Drops Out”
By Tyler Durden
Submitted by Mish Shedlock of MishTalk
Showdown! In Leaked Letter IMF Tells Germany “Debt Relief For Greece Or IMF Drops Out”
It’s showdown time.
The IMF has threatened it will pull out of the Greek bailout program unless Greece gets debt relief.
German Chancellor Angela Merkel, Austria, Finland, and the other Eurozone creditors will not like today’s development one bit.
Showdown!
Please consider IMF Tells Eurozone to Start Greek Debt Talks.
The International Monetary Fund has told eurozone finance ministers they must immediately begin negotiations to grant debt relief for Greece despite German opposition, upending carefully orchestrated negotiations ahead of an emergency meeting on Monday.
In a letter to all 19 ministers sent on Thursday night and obtained by the Financial Times, Christine Lagarde, the IMF chief, said stalemated talks with Athens to find €3bn in “contingency” budget cuts, which have gone on for a month, had become fruitless and that debt relief must be put on the table immediately, or risk losing IMF participation in the programme.
Athens is facing €3.5bn in debt payments in July that it needs bailout aid to pay, and EU officials have told Greek government officials they do not want messy negotiations to continue during the Brexit campaign — meaning if no agreement is reached this month, leaders will not begin discussions again until just weeks before a possible default.
Similar last-minute talks a year ago rattled the Greek economy and raised questions about whether Greece could be ejected from the eurozone.
Relations between the IMF and Athens, already strained after last year’s brinkmanship, have reached a new low in recent weeks following WikiLeaks’ publication of a transcript of a private teleconference between Mr Thomsen and other IMF officials — a transcript Greek officials claimed showed the IMF was negotiating in bad faith.
Ms Lagarde stuck by the IMF’s assessment that such reforms would only produce a primary surplus of 1.5 per cent in 2018 — not the 3.5 per cent the EU has mandated.
“We do not believe that it will be possible to reach a 3.5 per cent of GDP primary surplus by relying on hiking already high taxes levied on a narrow base, cutting excessively discretionary spending, and counting one-off measures as has been proposed in recent weeks.”
Leaked Letter
Dear minister:
Program discussions between Greece and the institutions have made progress in recent weeks, but significant gaps remain to be bridged before an agreement can be reached that would include the IMF under one of our program facilities. I think it is time for me to clarify our position, and to explain the reasons why we believe that specific measures, debt restructuring, and financing must now be discussed simultaneously.
In particular, a clarification is needed to clear unfounded allegations that the IMF is being inflexible, calling for unnecessary new fiscal measures and – as a result – causing a delay in the negotiations and the disbursement of urgently needed funds.
First, together with the other institutions we have negotiated in good faith with our Greek …read more
Source: Showdown! In Leaked Letter IMF Tells Germany “Debt Relief For Greece Or IMF Drops Out”
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