The IMF Debt Sustainability Analysis report on Greece that came out
this week has caused a big stir. We now know that the Fund’s analysts
confirm what Syriza has been saying ever since they came to power 5
months ago: Greece needs debt relief, lots of it, and fast.
We also know that Europe tried to silence the report.
But what’s most
interesting is that this has been going on for months, as per Reuters.
Ergo, the IMF has known about the -preliminary- analysis for months, and
kept silent, while at the same time ‘negotiating’ with Greece on
austerity and bailouts.

And if you dig a bit deeper still, there’s no avoiding the fact that
the IMF hasn’t merely known this for months, it’s known it for years.
The Greek Parliamentary Debt Committee reported three weeks ago that it
has in its possession an IMF document from 2010(!) that confirms the
Fund knew even at that point in time.
That is to say, it already knew back then that the bailout executed
in 2010 would push Greece even further into debt. Which is the exact
opposite of what the bailout was supposed to do.
The 2010 bailout was the one that allowed private French, Dutch and
German banks to transfer their liabilities to the Greek public sector,
and indirectly to the entire eurozone‘s public sector. There was no debt
restructuring in that deal.
Reuters yesterday reported that “Publication of the draft Debt Sustainability Analysis laid bare a dispute between Brussels and [the IMF] that has been simmering behind closed doors for months.
But that’s not the whole story. Evidently, there was a major dispute
inside the IMF as well. The decision to release the report was
apparently taken without even a vote, because it was obvious the Fund’s
board members wanted the release. The US played a substantial role in
that decision. Why the timing? Hard to tell.
The big question that arises from this is: what has been Christine
Lagarde’s role in this charade? If she has been instrumental is keeping
the analysis under wraps, she has done the IMF a lot of reputational
damage, and it’s getting hard to see how she could possibly stay on as
IMF chief. She has seen to it that the Fund has lost an immense amount
of trust in the world. And without trust, the IMF is useless.
And while we’re at it, ECB chief Mario Draghi, who is also a major
Troika negotiator, made a huge mistake this week in -all but- shutting
down the Greek banking system, a decision that remains hard to believe
to this day. The function of a central bank is to make sure banks are
liquid, not to consciously and willingly strangle them.
How Draghi, after this, could stay on as ECB head is as hard to see
as it is to do that for Lagarde’s position. And we should also question
the actions and motives of people like Jean-Claude Juncker and Jeroen
Dijsselbloem.
They must also have known about the IMF’s assessment, and still have
insisted there be no debt relief on the negotiating table, although the
analysis says there cannot be a viable deal without it.
One can only imagine Varoufakis’ frustration at finding the door shut
in his face every single time he has brought up the subject. Because
you don’t really need an IMF analysis to see what’s obvious.
Which is exactly why there is a referendum tomorrow: Alexis Tsipras
refused to sign a deal that did not include debt restructuring. It would
be comedy if it weren’t so tragic, most of all for the people of
Greece. Here’s from Reuters yesterday:

Europeans Tried To Block IMF Debt Report On Greece

Euro zone countries tried in vain to stop the IMF publishing a gloomy
analysis of Greece’s debt burden which the leftist government says
vindicates its call to voters to reject bailout terms, sources familiar
with the situation said on Friday. The document released in Washington
on Thursday said Greece’s public finances will not be sustainable
without substantial debt relief, possibly including write-offs by
European partners of loans guaranteed by taxpayers. It also said Greece
will need at least €50 billion in additional aid over the next three
years to keep itself afloat. Publication of the draft Debt
Sustainability Analysis laid bare a dispute between Brussels and the IMF
that has been simmering behind closed doors for months.

Greek Prime Minister Alexis Tsipras cited the report in a televised
appeal to voters on Friday to say ‘No’ to the proposed austerity terms,
which have anyway expired since talks broke down and Athens defaulted on
an IMF loan this week. It was not clear whether an arcane IMF document
would influence a cliffhanger poll in which Greece’s future in the euro
zone is at stake with banks closed, cash withdrawals rationed and
commerce seizing up. “Yesterday an event of major political importance
happened,” Tsipras said. “The IMF published a report on Greece’s economy
which is a great vindication for the Greek government as it confirms
the obvious – that Greek debt is not sustainable.”

At a meeting on the IMF’s board on Wednesday, European members
questioned the timing of the report which IMF management proposed at
short notice releasing three days before Sunday’s crucial referendum
that may determine the country’s future in the euro zone, the sources
said. There was no vote but the Europeans were heavily outnumbered and
the United States, the strongest voice in the IMF, was in favor of
publication, the sources said.

The reason why all Troika negotiators should face very serious
scrutiny is that they have willingly kept information behind that should
have been crucial in any negotiation with Greece. The reason is
obvious: it would have cost Europe’s taxpayers many billions of euros.
But that should never be a reason to cheat and lie. Because once you
do that, you’re tarnished for life. So in an even slightly ideal world,
they should all resign. Everybody who’s been at that table for the
Troika side.
And I can’t see how Angela Merkel would escape the hatchet either.
She, too, must have known what the IMF analysts knew. And decided to
waterboard the Greek population rather than be forced to explain at home
that her earlier decisions (2010) failed so dramatically that her
voters would now have to pay the price for them. No, Angela likes to be
in power. More than she likes for the Greeks to have proper healthcare.
Understandable, perhaps, but unforgivable as well. Someone should
take this entire circus of liars and cheaters and schemers to court.
They’re very close to killing the entire EU with their machinations. Not
that I mind, the sooner it dies the better, but the people involved
should still be held accountable. It’s not even the EU itself which is
at fault, or which is a bad idea, it’s these people.
But fear not, there’s no tragedy that doesn’t also have a humorous
side. And I don’t mean that to take anything away from the Greek
people’s suffering.
Brett Arends at MarketWatch wrote a great analysis of his own, and
get this, also based on IMF numbers. Turns out, the biggest mistake for
Greece and Syriza is to want to stay inside the eurozone. The euro has
been such a financial and economic disaster, it’s hard to fathom that
nobody has pointed this out before. Stay inside, and there’s no way you
can win.
I find this a hilarious read in face of what I see going on here in Greece. It makes everything even more tragic.

Stop Lying To The Greeks — Life Without The Euro Is Great

Will the euro-fanatics please stop lying to the people of Greece? And
while they’re at it, will they please stop lying to the rest of us as
well? Can they stop pretending that life outside the euro — for the
Greeks or any other European country — would be a fate worse than death?
Can they stop claiming that if the Greeks go back to the drachma, they
will be condemned to a miserable existence on the dark backwaters of
European life, a small, forgotten and isolated country with no
factories, no inward investment and no hope? Those dishonest threats are
being leveled this week at the people of Greece, as they gear up for
the weekend’s big referendum on more austerity.

The bully boys of Brussels, Frankfurt and elsewhere are warning the
Greek people that if they don’t do as they’re told, and submit to yet
more economic leeches, they may end up outside the euro … at which
point, of course, life would stop. Bah.

Take a look at the chart. It compares the economic performance of
Greece inside the euro with European rivals that don’t use the euro.
Those other countries cover a wide range of situations, of course – from
rich and stable Denmark, to former Soviet Union countries, to Greece’s
neighbor Turkey, which isn’t even in the EU. But they all have one thing
in common.

During the past 15 years, while Greece has been enjoying the
“benefits” of having Brussels run their monetary policies, those poor
suckers have all been stuck running their own affairs and managing their
own currencies (if you can imagine). And you can see just how badly
they’ve suffered as a result.

They’ve crushed it. Romania, Turkey, Poland, Sweden, Croatia — you
name it, they’ve all posted vastly better growth rates than Greece. The
data come from the IMF itself. It measures growth in gross domestic
product, per person, in constant prices (in other words, with price
inflation stripped out). Greece adopted the euro in 2001.

And after 14 years in the same club as the big boys, they are back
right where they started. Real per-person economic growth over that
time: Zero. Meanwhile Romania, with the leu, has only … er … doubled.
Everyone else is up. The Icelanders, who suffered the worst financial
catastrophe on the planet in 2008, have nonetheless managed to grow.

Yes, all data points have caveats. Each country has its own story and
its own advantages and disadvantages. But the overall picture is clear:
The euro has either caused Greece’s disastrous economic performance, or
at least failed to prevent it.

What I find amazing about the euro-fanatics is that they just don’t
seem to care about facts at all. They carry on repeating the same claims
about the alleged miracle cure of their currency, no matter what
happens. You can hit them over the head with the latest IMF World
Economic Outlook and they carry on droning, unfazed.

I was in England during the 1990s when those people were warning that
if the Brits didn’t give up the pound sterling and join the euro, they
were doomed as well. For a laugh, I just went through news archives on
Factiva and refreshed my memory.

Britain without the euro would be an “orphan country,” petted,
humored but ignored, warned one leading figure. Britain would lose all
influence and status. It would become a marginal country outside the
mainstream of Europe. It would lose “a million jobs.” Factories would
close. The car industry would collapse. Foreign investors would walk
away because of Britain’s isolation.

Exports would plummet because of exchange-rate fluctuations. The City
of London, Britain’s financial district, would lose out to Frankfurt.
The London Stock Exchange would be reduced to a local backwater.
Tumbleweeds would blow in the streets. (OK, I made that one up.)

And here we are today. Since 1992, when the single currency project
began taxiing for takeoff, the countries on board have seen total
economic growth of 40%, says the IMF. Poor old Great Britain, stuck back
at the departure lounge with its miserable pound sterling? Just 67%.
Bah.

This currency that Greece is fighting so hard to be part of is in
fact strangling it. The reason for this lies in the structure of the
EMU. Which makes it impossible for individual countries to adapt to
changing circumstances. And circumstances always change. As a country,
you need flexibility, you need to be able to adapt to world events.
You need to be able to devalue, you need a central bank to be your
lender of last resort. Mario Draghi has refused to be Greece’s lender of
last resort. That can’t be, that’s impossible. there is no valid
economic reason for such an action, it’s criminal behavior. But the
eurozone structure allows for such behavior.
In ‘real life’, where a country has its own central bank, the only
reason for it to refuse to be lender of last resort would be political.
And it is the same thing here. It’s about power. That’s why Greece’s
grandmas can’t get to their meagre pensions. There is no economic reason
for that.
In the eurozone, there’s only one nation that counts in the end:
Germany. The eurozone has effectively made it possible for Angela Merkel
to save her domestic banks from losses by unloading them upon the
Greeks. This would not have been possible had Greece not been a member
of the eurozone.
That this took, and still takes, scheming and cheating, is obvious.
But that is at the same time the reason why either all Troika
negotiators must be replaced, and by people who don’t stoop to these
levels, or, and I think that’s the much wiser move, countries should
leave the eurozone.
Look, it’s simple, the euro is finished. It won’t survive the
unmitigated scandal that Greece has become. Greece is not the victim of
its own profligacy, it’s the victim of a structure that makes it
possible to unload the losses of the big countries’ failing financial
systems onto the shoulders of the smaller. There’s no way Greece could
win.
The damned lies and liars and statistics that come with all this are
merely the cherry on the euro cake. It’s done. Stick a fork in it.
The smaller, poorer, countries in the eurozone need to get out while
they can, and as fast as they can, or they will find themselves saddled
with ever more losses of the richer nations as the euro falls apart. The
structure guarantees it.

Tyler Durden