IMF: should it stay or should it “go”

IMF: should it stay or should it “go”

Athens, December 27, 2015/ Independent Balkan News Agency

By Olga Mavrou

The Greek government wants the IMF to withdraw from its bailout programme. IMF wants out to, since the Europeans don’t agree in the necessary haircut the IMF insists upon. Europeans are indecisive but mainly they’d rather have the IMF as an advisor only but out of the programme as a main player since they are unwilling to accept the haircut (they would consider only a reconstruction of the debt). At the same time though, Germany (the bigger European lender of Greece) and the USA want the IMF  fully involved. No one can predict the outcome yet.

The Greek government wants IMF out for many reasons, the main being that according to Prime Minister Alexis Tsipras and many Greek finance ministers in the past, IMF should have never been involved in the Greek crisis in the first place and the issue should have been settled within the European “community”.  This political issue is a priority for the Greeks, and as long as IMF stays fully involved, the debt is not considered an absolutely European issue, but isolates Greece in a lonely fight against all odds. Furthermore, the recapitalization of the Greek banks was supposed to cost 25 billion euros   but it eventually cost only 5.7 billion, so as the Greek Prime Minister puts it, the 86-billion-euro bailout program has been reduced by 19 billion and IMF is no longer needed.

But the main reason (also political) Greeks insist on getting rid of IMF, is the fact that the representatives of the Fund are technocrats that “can see only numbers” and they are not giving any value either to democratic procedures or to the will of the Greek people. They keep demanding harsh reforms that are not only unpopular and quite severe, but they are to be doomed as well. Without a haircut the harsh reforms the IMF insists upon, will prove to be a cruel and aimless sacrifice of the Greek people. In other words, Greeks agree with IMF on the haircut as the only way out and since the haircut seems “out of the question” for the Europeans, then there is no way (or even any reason) to put those reforms on the table. As the Greeks put it, “we can’t have both the harsh reforms and the denial for a haircut, the European community must make a choice”.

There is a financial point as well, since the IMF lends to Greece at a  3.8% interest rate, while the European Stability Mechanism lends at 1%.

The Director of the IMF’s European Department, Poul Thomsen, as well as other Fund executives are also recommending that it withdraws from the Greek program.

Thomsen wants to withdraw in a way that will allow IMF to remain only as a technical advisor. The main reason is the fact that the program of Greece does not meet the conditions in the Fund’s Statute for its participation in a support program as long as a haircut is not on the table.

With the USA government and Germany insisting upon the full involvement of IMF in the Greek bailout program, no one can be sure of what will eventually be decided for the Greeks. Greece hopes, by removing IMF out of the picture, to regain  a part of its sovereignty  and bargain for the rest of it with the Europeans.