Minutes of International Monetary Fund board meetings held in May 2010 and published by the Wall Street Journal on Tuesday have highlighted the concern of many country representatives that the Greek bailout was not sustainable.
One of the key criticisms expressed during meetings held before Athens agreed its first bailout with its eurozone partners and the IMF is that the design of the bailout favored European banks at the expense of Greece.
The absence of debt restructuring at the beginning of the program also met with opposition.
“The International Monetary Fund proceeded with its record 2010 bailout of Greece despite deep internal divisions over whether it would work, according to confidential documents that contradict the fund’s public statements.
The new details of the rift come as the crisis lender is now pressing European governments to forgive some of the country’s debt in a fresh round of difficult talks. The idea is unpopular with Germany and other European nations because their taxpayers would take the hit. But it stands a chance because the IMF is now making future support conditional on significantly reducing Greece’s debt burden.
The topic will be high on the agenda when finance ministers from around the world gather in Washington this week for the IMF’s annual meeting.
The fund’s determination to see Greece’s debt burden reduced stems in part from lingering bitterness over how the first bailout was approved at a contentious May 9, 2010, IMF board meeting, according to some fund officials. The cache of papers documenting that decision—marked “Secret” or “Strictly Confidential” and reviewed by The Wall Street Journal—offers a rare glimpse inside the IMF as the international emergency lender struggled to avert a rapidly unfolding financial disaster.
Nearly a third of the board’s members, representing more than 40 non-European countries, raised major objections to the bailout’s design at the meeting, according to the internal records. Many objected that it placed all the burden of a painful adjustment on the Greeks while asking nothing of its European creditors. Several suggested the bailout was doomed to fail unless Greece’s creditors reduced some of the financially troubled country’s towering debt burden.”
(full article Wall Street Journal)
What? The IMF wanted debt restructuring right at the beginning, while our EUrozone partners and Germany opposing it? Of course. How else could they get rid of the Greek bonds and save money? How else could some hedge funds earn millions form betting on the Greek collapse and Grexit? A horror period of scenarios of Greek and eurozone doomsday that lasted almost two years?
“This is just one side of the story and it would be interesting to see the EU’s/ECB’s reaction to the concerns raised by the IMF. I would think that the threat of Europe collapsing, if something wasn’t done straight away, would have overridden the IMF fears leading them to join the program from day one.”(forexlive)
Absolutely BTW: the IMF was our friend and protector, while our EU-partners played games behind our back? Certainly. Eager to hear EU’s/ECB’s and former euro zone chief Juncker’s reactions, while the IMF tries to throw the ball of famous “wrong calculators” into another yard.
Not to forget, that three years later, October 2013, the IMF insists on another Greek debt restructuring, while the eurozone under the leadership of Germany rejects such option.
short version of WSJ story via ekathimerini