“The International Monetary Fund should stop torturing Greece. The IMF could write off its debt, lighten Greece’ burden and do not demand another bank recapitalization.” This is the general idea of an opinion article posted at Bloomberg and written by Kyle Bass chief investment officer at hedge fund Hayman Capital Management, where the author is chief investment officer, has investments in the equities of Greek banks.
The IMF Needs to Stop Torturing Greece
“Beware of Greeks bearing gifts,” wrote the ancient Roman poet Virgil. In the 21st century, it’s the Greeks who should have been more careful about accepting offerings — specifically from the International Monetary Fund, which is now torturing the country in a misguided effort to get its money back.
Greek officials have worked hard to shore up their economy and finances. From 2010 through 2016, the government achieved the all-but-impossible task of shrinking its primary budget deficit by nearly 18 percent of gross domestic product, and is finally in surplus.
The banking sector, too, has made great strides. After two full inspections of their loan books — first by BlackRock in 2013 and later by the European Central Bank’s Single Supervisory Mechanism — the banks have been fully recapitalized twice. They have bolstered their provisions against bad loans, and their capital ratios are now significantly higher than the European average, providing a buffer against any future losses.
Greece, however, still carries a heavy burden: the roughly 250 billion euros that the IMF and its European partners lent the country to save its economy and most likely the entire euro area. This stock of official bail-out debt remains due even though private creditors have been amply haircut, restructured and wiped out. In 2012, for example, the government’s private-sector bondholders were forced to accept a loss of nearly 80 percent. Greek bank shareholders have seen their investments wiped out twice in recapitalizations.
The IMF could write off its debt and lighten Greece’s burden. This would benefit the country’s long-term economic health, and therefore Europe’s, too. Instead, the fund is demanding further austerity measures and insisting on “structural” reforms of dubious value. By sticking to this economic ideology, it is neutering the nascent economic growth and stifling any hope of real prosperity.
The IMF’s attitude adds to “further erosion of investor confidence in Greece and an undermining of European banking regulators’ political independence.” – full article Bloomberg
In Bloomberg’s disclaimer we read that Hayman Capital Management has investments in the equities of Greek banks.
PS ah, the problem of Greece’s debt is the IMF? I thought it was German Finance Minister Wolfgang Schaeuble, who has vehemently rejected IMF’s requests to lower the high primary surplus targets and any discussion about debt relief… Does the IMF plan another bank recapitalization? I.m no so sure. But the article is right at one point: the more the IMF hesitates about its participation in the program, the more investor’s confidence is suffering and in this context also Greece’s economy and people.
According to imho, the article should have the title: Foreign investors worry about IMF’s intention to perform another check on Greek banks.