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UPD IMF warns Greece needs deeper debt relief, Schaeuble wants 3. Bailout AND Grexit

A secret study by the International Monetary Fund showed that Greece needs far more debt relief than European governments have been willing to contemplate so far. The IMF study is an updated version of July 2nd as it takes into consideration the capital controls imposed since June 29th 2015.

“Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking
system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at Euro 85 billion and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece’s debt can now only be made sustainable through debt
relief measures that go far beyond what Europe has been willing to consider so far.” (IMF’s updated Debt Sustainbility)

In an exclusive report by Reuters that obtained the study leaked today, Tuesday, writes:

“The study, seen by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.

“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date – and what has been proposed by the ESM,” the IMF said, referring to the European Stability Mechanism bailout fund.

The IMF study said the closure of Greek banks and imposition of capital controls on June 29 was “extracting a heavy toll on the banking system and the economy, leading to a further significant deterioration in debt sustainability relative to what was projected in our recently published DSA”.

An EU source said euro zone finance ministers and leaders had been aware of the confidential IMF figures when they agreed on Monday on a roadmap to a third bailout.

IMF Managing-Director Christine Lagarde was present but the IMF did not make the updated assessment public, in contrast to a previous study which was released in Washington on July 2.”

(full story Reuters and IMF’s report).

The IMF notes that the updated report has neither been discussed nor approved by the IMF’s Executive Board.

IMF’s Debt Sustainability Study from July 2nd 2015 here

IMF’s Updated Debt Sustainability Report from July 14th

IMF vs Schaeuble

The IMF can say what it wants, all what Schaeuble wants is Crush Greece & the Greeks with a 3. Bailout AND Grexit, as he said today and after the Monday’s deal.

“Germany’s finance minister Wolfgang Schäuble questioned a tentative bailout deal for Greece just a day after it was agreed by eurozone leaders, by saying Tuesday that an exit from the currency union may be a better alternative for the country and its citizens.

Asked about the idea of a Greek exit, Mr. Schäuble told journalists “there are many people inside the German government…who believe that this would be, or could be the better solution for Greece and the people in Greece.” He didn’t say whether he was among those who hold that opinion, although many European officials have said that he has done little to hide his support for a Grexit during crisis talks in recent weeks.” (via WSJ)

Of course, the “many people inside the German government” are the hardliners who don’t give a damn about “Greece and the people in Greece”, they are just scared to lose their voters after they pushed for a tough anti-Greek campaign for weeks/months/ make it : 5 years.

Not only Schaeuble but also Merkel knew that around 100 CDU/CSU guys and girls have been opposing a 3. bailout to Greece. But they had to publicly humiliate Tsipras first. It is not coincidence that Schaeuble is making this statement today, as Tsipras is trying to convince his own lawmakers to vote in favor of the austerity package.

The voting in German Bundestag is on upcoming Friday.

PS Hypocrisy is a Greek word adopted by many EU countries.

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17 comments

  1. sometimes we need somehumor guys;

    • Here we go:

      1. The November 2012 agreement was fine. Until a year ago no debt relief was needed.

      2. During the last 6 months of Samaras’s government and the 6 months of Tsipras’s government the program was not implemented as agreed. Cost: 60 B euros (2 weeks ago IMF indicated 50 B euros of new funding is needed). In addition, the Europeans (GLF, EFSF) would need to double the grace pay period & maturities. Note there is no IMF debt restructuring.

      3. Then Tsipras called a referendum, the negotiations broke down, ECB stopped increasing the ELA ceiling, Greece introduced capital control. Cost: 25 B euros on top of (2) to bring back the banks to life.

      4. The assumptions going forward are unrealistic (Greeks not willing to cut pensions, reduce public sector jobs and salaries as agreed, growth projections too rosy, Greek banking system unsustainable). The EZ countries will need to fund the Greek government for decades with 30 years of grace period.

      It looks to me like the IMF is washing its hands of Greece.

      • In his interview Tsipras questions the figure of 25 billion euros needed to bring back the Greek banks to life according to the IMF. He stated: “Twenty-five billion is more than enough. I believe banks will need €10bn-15bn.”

      • “Until a year ago, no debt relief was needed”?! In what universe? The rules of the IMF is that public debt shouldn’t exceed 120% of the GDP. When was the last time it happened in Greece?

      • I have never read so much garbage and propaganda in my life. Kindly stop posting your stinking rubbish in a public place, it is selfish and inconsiderate to decent people.

        • @Xenos, I am just restating what the 3,5 page IMF report is saying. You can read it yourself if you care. You might consider it “garbage and propaganda”; you are entitled to your opinion.

          @Daphné, Here’s what the IMF report says: “About a year ago, if program policies had been implemented as agreed, no further debt relief would have been needed to reach the targets under the November 2012 framework (debt of 124 percent of GDP by 2020 and “substantially below” 110 percent of GDP by 2022).” You can agree or disagree with their statements, but they are pretty clear that the 2012 program was sustainable if only the Greek side kept their part of that bargain.

          • keeptalkinggreece

            “about a year ago, if program policies had been implemented as agreed” – LOL we saw it in privatizations, mass lay-offs from public sector etc. The only part of program implemented was to strip the poor of essential goods, the sick of medication, the low pensioners of electricity & heat in winter, the disabled from benefits, and overtaxing free lancers.

          • Giaourti Giaourtaki

            Then post as IMF and not Plamen

          • Sorry I was not clear in my original message that this is not my opinion.

          • keeptalkinggreece

            therefore ‘press releases’ –

          • The IMF report does not say “1. The November 2012 agreement was fine. Until a year ago no debt relief was needed.”

            If you cannot understand technical economic reports, then I suggest you ask people who write such things (eg myself) to explain them to you. Interpreting a language you don’t know properly is a stupid thing to do.

  2. Laurette LaLiberte

    Why are they going through with this farce in Parliament. It seems like it must violate the Greek constitution somehow, not to mention the people. Not only will it sell out the country and what little of value remains, it won’t help anything, it will only make things worse. It will just put off the ineveitable. This is like watching a slow-motion train wreck that no one can stop.

  3. Giaourti Giaourtaki

    And when the IMF kindly will publish that ELA-cuts are illegal and blackmail?
    Many people inside Uber-Europe want the Grexit too as that would allow them to live like kings under the sun and now that we all have learned that to have some growth there should be competitiveness, citizens of Uber-Europe desperately needs more countries to choose like Spain and Portugal and to make it even easier let’s cut off the south of France and Italy; everything south of Uber-Europe will be called EU’s Arse again.

  4. The EU does not need a Grexit but a Gerxit.

  5. Looking at the picture: “Bla, bla, bla,” says one career criminal to another.
    The EU power brokers are holding on by their fingernails to their lucrative pay packets & lifestyles, that is the only thing that the EU is to them.