Just when the Greek debt deal appeared certain even if as we reported last night, virtually all the funds from the approved first tranche would go to repaying creditors, the IMF, which has been pushing for more debt relief since last summer, appears read to pull the plug again, following a report that the IMF isn’t officially endorsing the latest Greek debt deal until the board approves new loan program, and according to AFP, the IMF is not ready to add funds to the Greek bailout as it stands now.
#BREAKING IMF says not ready to add funds to Greece bailout as it stands now— AFP news agency (@AFP) May 25, 2016
As Bloomberg adds, citing an IMF official says on conference call with reporters, that the IMF board should be able to consider new program by end of year.
IMF will be seeking more details on debt relief by European creditors and fund will analyze whether Greek debt is sustainable.
Most troubling is the warning that the IMF may come to a conclusion that latest debt-relief measures aren’t sufficient.
Jeroen Dijsselbloem, the Dutch politician leading the Eurogroup, claimed to have brokered a compromise between Germany and the IMF. He has he proposed a three-stage plan:
Short-term: Athens receives funds to reduce its debt and payment terms are adjusted.
Medium-term: Greece would receive longer grace and payment periods.
Long-term: There could be more far-reaching, though unspecified, measures.
And with Short- and Medium-term solutions now in doubt... again; Saxo Groups's Stephen Pope asks, What about the long-term?
What I want to know is, what about the third leg of the agreement? What are the more far-reaching, though unspecified, measures?
Where are the discussions about what Greece will do in terms of further privatisation? This has been the most aggravating issue for the creditors as Greece has simply dragged its feet on this matter for the past six years.
Privatisation of public companies contributes to the reduction of public debt. It releases the state from paying subsidies, other transfers or state guarantees to state-owned enterprises. It is a key catalyst for increasing the efficiency of companies and the competitiveness of the economy as a whole, while attracting foreign direct investment.
It helps countries pay back their debt, improves efficiency and effectiveness, and therefore would boost economic growth.
This idea is often challenged by the left and one favoured argument is that sales of state-owned assets during recession have consistently failed to raise expected revenues.
It was Greece that predicted it could raise €50bn but has so far raised a paltry €3.5bn. This is not just a result of selling at a time of recession, but also comes down to the fact that Athens delayed the process of privatisation for too long and was eventually seen as a distressed seller.
An asset is only worth what a buyer will pay, not what a seller would like.
Greece has simply wasted time, opportunity and money just as the troika are showing their plan for what it is worth. The Greeks will never repay their debt, nor will the economy be reformed…but the Eurozone will pick up the tab as a price worth paying.
The 2010 plan to preserve the Eurozone as a financial "lobster pot" with no exit has now morphed into something very different. The scheme now being hatched is to use Greece as a useful defence for the ”not in my backyard” Europeans against the thousands of helpless refugees.