Athens fury at IMF leak which complicates bailout review

Athens fury at IMF leak which complicates bailout review

Athens, April 4, 2016/ Independent Balkan News Agency

By Zacharias Petrou

The review of Greece’s adjustment program which is scheduled to begin Monday has been thrown into doubt following the the publication of a leaked transcript of a conversation that is alleged to have taken place between Poul Thomsen, the head of the International Monetary Fund’s European department, and Delia Velculescu, the IMF mission chief for Greece.

According to WikiLeaks which the transcript of a conversation, which took place last month, and in which the two leading IMF officials apparently discuss putting pressure on Germany over the eurozone’s position regarding Greece’s bailout review by threatening that the IMF will leave the program.

The Greek government is greatly concerned by developments as the IMF, according to Greek officials, seems to be working towards “causing of a credit event in order for the country to reach a breaking point and succumb to the extreme IMF positions. They cynically call the credit event the only incentive for an agreement and directly refer to the default of the country”.

According to the WikiLeaks transcript, the two IMF officials discuss an “event” that would force the Europeans to accept the IMF’s position so the bailout review can be concluded.

The transcript quotes Velculescu as saying: “What is interesting though is that [Greece] did give in … they did give a little bit on both the income tax reform and on the … both on the tax credit and the supplementary pensions”.

Thomsen’s view was that the Greeks “are not even getting close [to coming] around to accept our views”.

Velculescu argued that “if [the Greek government] get pressured enough, they would … But they don’t have any incentive and they know that the commission is willing to compromise, so that is the problem.”

Following the revelations, Greek officials said the government “is not willing to allow games to be played to the detriment of the country” while Prime Minister Alexis Tsipras chaired an emergency cabinet meeting over the weekend. Tsipras also informed the President of the Hellenic Republic and Greek political party leaders.

Alexis Tsipras also briefed European Parliament President Martin Schulz, European Central Bank Governor Mario Draghi, Angela Merkel, Antonio Costa and other European officials. Finance Minister Euclid Tsakalotos contaced counterparts J. Dijsselbloem and P. Moscovici as well as W. Schaeuble and Michel Sapin. According to Athens, all these contacts resulted in agreement that the first review of the Greek program must be completed in April.

On Monday Alexis Tsipras will speak with French President Francois Hollande and US Vice President Joe Biden over the issue.

The leaked conversations between IMF officials published by Wikileaks threaten to act as a catalyst for developments in talks with creditors in Athens.

There is intense irritation and discomfort for the content of the talks leaked, not only amongst Greek government circles but also amongst creditors. As sources close to the negotiation point out, it is extremely doubtful that talks between the government and creditors will even begin on Monday in Athens as scheduled.

“Nothing will begin if the Fund doesn’t clarify its stance or if Poul Thomsen does not change” European sources mentioned on Saturday, placing the issue of Poul Thomsen’s removal on the table. At the same time called IMF Managing Director Christine Lagarde to reveal the Fund’s real intentions and aims for the negotiations between Greece and its international creditors.

Analysts in Athens point out that regardless of whether the IMF wants to stay on or exit the Greek program, essentially the Fund’s representatives that appear to be discussing the Greek case, seem to be pressuring European creditors more to accept Greek debt relief rather than the Greek government to take additional measures.

In other words, the content of the conversations leaked seem to favor Greece and not the European creditors that are called upon to take decisions regarding Greek debt. Ms Velculescu appears in these conversations to express her discomfort at European creditors accepting the targets for a primary surplus to be eased without at the same time committing to granting necessary debt relief to the country.

Also, during the course of the conversation, if indeed it is authentic, the IMF officials repeatedly talk about “the good of Greece and the Greek people”, therefore they diplomatically show that they do not undermine the actions of the Greek government.

In any case the IMF officials seem to be putting threats on the table aimed at both sides; Germany and Angela Merkel on the one side to agree to debt relief if it wants the IMF to remain in the program and the Greek side too, which could be left negotiating with empty state coffers in July. As Poul Thomsen predicts, this is something that Europeans would not want to be happening in the summer at the same time that the United Kingdom’s future in the European Union will be determined.

Key to developments in the Greek bailout program review is the spring meetings of the IMF in Washington on April 15-17, including all the biggest euro zone members, as well as top representatives of all the key euro zone institutions.