Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers

Tyler Durden's picture

As we summarized earlier, the latest "final" Greek proposal is in trouble: it may very well not pass the Greek parliament due to mounting objections among all parties not least in Tsipras' own Syriza. But a Greek parliament vote on the decision may be moot: according to Bloomberg, Tsipras will fly to Brussels on Wednesday, where he will meet the heads of the Troika: Draghi, Juncker and, of course, Christine Lagarde.

It is the IMF's head that will tell Greece to go back to the drawing board.

Recall that as the WSJ reported, "the Washington-based IMF has said Greece’s economy is already too heavily taxed and that too many additional tax increases would hurt economic growth, making it harder to pay down Greece’s debt."

Also recall that as IMF's Olivier Blanchard explicitly demanded, Greece needs to cut spending, not hike taxes - which it has patently demonstrated it is incapable of collecting - and especially pensions: "Why insist on pensions? Pensions and wages account for about 75% of primary spending; the other 25% have already been cut to the bone.  Pension expenditures account for over 16% of GDP, and transfers from the budget to the pension system are close to 10% of GDP.  We believe a reduction of pension expenditures of 1% of GDP (out of 16%) is needed, and that it can be done while protecting the poorest pensioners."

So why will the IMF throw up all over the latest Greek proposal in just two numbers? Here is the answer, courtesy of Kathimerini:

The proposals contain 7.9 billion euros of measures, of which 7.3 are from increases to tax and social security contributions.

The IMF demands no tax hikes and pension cuts. Instead it will get almost exclusively tax hikes, amounting to 92% of the proposed measures, and just a few cuts, few of which actually impact Greek pensions. In short: the proposal is not only unsustainable, it is also unenforceable, something which the Germans - already facing a third Greek bailout - will be quick to point out.

Which is why tomorrow, after Tsipras is finished with the meeting with the Troika, he will have a new homework assignment: revise the "final final" proposal and come up with much less in tax hikes, much more in spending cuts: something which the already furious hard-line elements within Syriza will have a field day with.

Then again, we already knew all of that:


And all this takes place just 7 days before the Greek payment to the IMF is officially due, at which point Greece may or may not be declared in default, but when the ECB will no longer be able to say Greece is compliant with the terms of its bailout program and will have no choice but to yank the ELA.

Full Greek proposal below (pdf link).

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Atomizer's picture

Wasn't picking on you lastnight. I knew you were livid. Keep up the great posts. I had to chime in with your all caps and bold text rant. Been there myself. 

Your a great contributing poster on Zerohedge. ;)

YHC-FTSE's picture

Ditto on the last sentence.

Ward no. 6's picture

so what if a person decides to do bold text...

btw it is you're not your


ThrowAwayYourTV's picture

Yeah, I cant see any of this working in the long run anyway.

It's like you missing six mortgage payments so the bank lends you more money to pay your mortgage payments.

Pretty much how the whole world runs right now which means.... Oh Wait! This is the shot across the bow and everyone is looking over the stern?

Anopheles's picture

You joke about the mortgage payments. 

But there WERE negative equity mortgages in the US before 2008.  The payments didn't even cover the interest, and the loans counted on the "forever" increasing house values to make up the difference.

Remind us how that turned out....  



NubianSundance's picture

Regret to inform viewers that the deal is going sour and early optimism misplaced according to the guardian tonight.

mijev's picture

Researchers have used gene manipulation to reverse colorectal cancer. The patients said that would rather not have this treatment if it means having watch any more of this greek shit play out every fucking minute of every fucking day of every fucking week.

Moccasin's picture

What a soap opera. The IMF will end up doing what the so called radical government of Greece is not willing to do, reject the deal. It is like watching a wounded dog die. Put them both out of their misery, somebody...anybody, just pull the trigger and get it over with!

CHC's picture
CHC (not verified) Jun 23, 2015 8:16 PM

There is NO way the Greek offer won't be accepted.  The IMF/ECB/etc will be happy to accept "pennies on the dollar" before they see Greece default or exit the EU.

idontcare's picture

... or the IMF doesn't accept it, Putin steps in and bails Greece out, and Russia has a satellite state in an area which will make a lot of people politically uncomfortable.


PS  I'd rather have Putin get involved then we in the US somehow step in this pile of dogshit.  Given Mr. "I think that I am the 2d coming" in the White House, I wouldn't put it past him to put US taxpayers on the hook for bailing out Greece and use the rationale that if we don't bail out Greece, everything collapses (ala Paulson's bullshit back in 2008).

Penelope Dreadful's picture

I'm testing to see if everything works

falga's picture

too many leaks, too litttle time and great payment obstacles over next few months. Despite optimistic leaks and contradictory messages from IMF and ECB perhaps paranoid traders should make sure they have insurance in case of an accidental exit!

Morla's picture

Greece is the AIG of Europe, a backdoor bailout for their own banks. This way when taxpayers get stuck with the bill, which they will (always socialize the losses), Greece takes all the blame instead of Douche Bank, Goldman and friends.

The REAL bailout the Greeks are getting is the ELA, one last chance to get their euros out of Greek banks. At this point the only way Tspiras can help the Greek people is to buy them more time to complete the bank run. When it's all over the only euros left in Greece will be in mattresses.

Pensions will be paid, in drachmas. Bank accounts will reopen, in drachmas. The winner will be whoever has the least comfortable bed.

Soul Glow's picture

Accepting a VAT tax is like accepting the financial death penalty.

Wilcox1's picture

Just give them a whole bunch more money, they can tax it and pay you back. No problem.

Soul Glow's picture
TeraByte's picture

Every party has screwed itself into a neverending mess, where the creditors still are dead afraid to pull the plug. Was there no contagion risk, why did not the trap door open. Greeks play quite well their cards, where proceeds would materilize as huge losses to the taxpayer in other countries and politicians involved don´t dare to face the electrorate thereafter. Now more unsustainable borrowing will be availble to avoid the inevitable.

Salsipuedes's picture

Here's what we do: We agree to disagree until the whole world in unison says: SHUT THE FUCK UP! YOU'RE ALL FIRED!

petroglyph's picture

I can't believe Tsipras is going to get in a plane

ramgold2206's picture

FFS I'm so fed up with all this EU bullshit...Ireland took the opposite direction to Greece yet the problems remain (just under the surface). The euro project is doomed but it will limp on for years crisis after crisis dragging everyone down with it.  

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if you're interested in what is a decent opportunity visit  www.teamramgold.com my own site - email me for info. 

Irishcyclist's picture

Pensions and wages account for about 75% of primary spending.


By cutting wages and pensions and raising taxes such as V.A.T., will not deliver Greek economic turnaround.

polo007's picture

According to Natixis:


Public debt ratios must be reduced, but how?

The high level of public debt is a permanent threat to growth: if interest rates rise, rapid tax increases or government spending cuts would be needed, with the risk of creating tax distortions and reducing potential growth. This threat may also drive private economic agents to build up precautionary savings.

It would therefore be very positive to reduce public debt ratios, but how?

- By keeping long-term interest rates lower than nominal growth, although this reduces the public debt ratio extremely slowly. In addition, it is dangerous from a financial stability point of view and may generate negative incentive effects;

- By monetising the public debt, i.e. by transferring it to the central bank’s balance sheet, and by cancelling it (actually or de facto); but one must then accept the risks linked to chronic excess monetary creation;

- By considerably extending the maturity of the public debt, by replacing it with bonds with a very long maturity (50 years, 100 years, perpetuity), by taking advantage of the very low level of long-term interest rates. This would considerably reduce the interest rate risk weighing on the public debt. The criticism often levelled against this method is that it shifts the burden of repayment to future generations;

- A more original approach: by cancelling the part of the public debt held by residents; there is then de facto neutrality: on the one hand, the residents receive interest on the government bonds they hold and, on the other hand, they pay taxes that finance the interest on these bonds. The cancellation of the debt eliminates both the interest on the debt held domestically and the taxes that finance it, resulting in macroeconomic profitability. The redistributive effects of this debt cancellation will still have to be corrected, which is possible. We obviously know that this possibility will never be used.

fumb-ducker's picture

Maybe buying physical bullion is one way of putting the screws on the money-junkies...