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Explosive! WikiLeaks exposes IMF’s strategy of delays in Review Talks aiming to trigger Greece’s Default

WikiLeaks and Julian Assange published today the records of a 19 March 2016 teleconference between the top two officials of the International Monetary Fund who in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

Wikileaks publishes transcript of March 19 IMF call on Greek default and Brexit: “This is going to be a disaster”.

The IMF anticipates a possible Greek default co-inciding with the United Kingdom’s referendum on whether it should leave the European Union (‘Brexit’).

19th March was the day that the IMF team was leaving Greece. It is not clear whether the teleconference was taking place in Greece or in some other country.

The conversation between the two IMF officials plus a member of the negotiations technical team reveals the “strategy” the IMF plans to follow in order to force Greeks to accept more measures and German Chancellor Angela Merkel to accept a debt relief.

It seems as if the IMF “plots” a credit event for Greece. This could occur if the 3. bailout tranche delays due to Review later conclusion and Athens is unable to repay the IMF. A credit event can strengthen the IMF’s position against PM Tsipras – to accept stricter austerity especially in the pensions reform – and Chancellor Merkel -to OK debt relief.

IMF Thomsen aims to delay the agreement with Greece [now IMF has advisor’s role in the Program Review negotiations for the 3. bailout] until it coincides timely with the UK’s referendum and in hope that a Brexit would further worsen the Greek debt issue.

Thomsen:  No agreement with Greece in April/May. We need another ‘Event’ in July to force… Merkel’s hand.

Thomsen: The threat of an imminent financial catastrophe is needed to force the other players {European lenders] into a “decision point.”

No, this is not the transcript of conversation between common common criminals like blackmailers, usurers and loan sharks. It is the IMF officials talking.

Below the WikiLeaks release:

“This is going to be a disaster” remarks Velkouleskou in the meeting.

According to the internal discussion, the IMF is planning to tell Germany that it will abandon the Troika (composed of the IMF, European Commission and the European Central Bank) if the IMF and the Commission fail to reach an agreement on Greek debt relief.

Thomsen: “Look you, Mrs. Merkel, you face a question: you have to think about what is more costly, to go ahead without the IMF–would the Bundestag say ‘The IMF is not on board?’, or [to] pick the debt relief that we think that Greece needs in order to keep us on board?”

Remaining in the Troika seems an increasingly hard sell internally for the IMF, because non-European IMF creditor countries view the IMF’s position on Greece as a violation of its policies elsewhere of not making loans to countries with unsustainable debts.

In August the IMF announced it would not participate in last year’s €86 billion Greek bailout, which was covered by EU member states. IMF Chief Christine Lagarde stated at the time that the IMF’s future participation was contingent on Greece receiving “significant debt relief” from creditors. Lagarde announced that a team would be sent to Greece, headed by Velkouleskou.

Thomsen said internally that the threat of an imminent financial catstrophe is needed to force the other players into a “decision point”. For Germany, on debt relief, and In the case of Greece, to accept the IMF’s austerity “measures,” — including raising taxes and cutting Greek pensions and working conditions. However the UK “Brexit” referendum in late June will paralyse European decision making at the critical moment.

“I am not going accept a package of small measures. I am not…” said Thomsen. “What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when [the Greeks] were about to run out of money seriously and to default. […] And possibly this is what is going to happen again. In that case, it drags on until July, and clearly the Europeans are not going to have any discussions for a month before the Brexits…”

Last year Greek Finance Minister Tsakalotos accused the IMF of imposing “draconian measures,” including on pension reform. While Velkouleskou concedes in the meeting that “What is interesting though is that [Greece] did give in… they did give a little bit on both the income tax reform and on the…. both on the tax credit and the supplementary pensions.”

But Thomsen’s view is that the Greeks “are not even getting close [to coming] around to accept[ing] our views.”  Velkouleskou argues that “if [the Greek government] get pressured enough, they would… But they don’t have any incentive and they know that the Commission is willing to compromise, so that is the problem.”

Velkouleskou: “We went into this negotiation with the wrong strategy, because we negotiated with the Commission a minimal position and we cannot go further [whereas] the Commission is just starting from this one and is willing to go much further. So, that is the problem. We didn’t negotiate with the Commission and then put to the Greeks something much worse, we put to the Greeks the minimum that we were willing to consider and now the Greeks are saying [that] we are not negotiating.”

While the Commission insists on a Primary Government Budget Surplus (total tax minus all government expenditure excluding debt repayments) of 3.5%; the IMF thinks that this target should be set at 1.5% of GDP. As Thomsen puts it, “if [Greece] come around to give us 2.5% [of GDP in tax hikes and pension-wage-benefits cuts]… we should be fully behind them.” — meaning that the IMF would, in exchange for this fresh austerity package, support the reduction of the Primary Surplus Target imposed upon them from the 3.5% that the European Commission insists on to 1.5%.

These targets are described as “very crucial” to the IMF. The IMF officials ask Thomsen “to reinforce the message about the agreement on the 2.5%, because that is not permeating and it is not sinking very well with the Commission.”

At one point, Velkouleskou refers to an unusual solution: to split the problem into two programs with two different targets: “The question is whether [the Europeans] could accept the medium term targets of the Commission, for the purposes of the program, and our targets for the purposes of debt relief.” Thomsen further explains that “They essentially need to agree to make our targets the baseline and then have something in that they hope that will overperform. But if they don’t, they will still disburse.”

The EWG [Euro Working Group] needs to “take a stand on whether they believe our projections or the Commission’s projections.” The IMF’s growth projections are the exact opposite of the Commission’s. The Commission projects a GDP growth of 0.5%, and the IMF a GDP decline of 0.5% (even if Greece accepts all the measures imposed by the IMF). [ Source: WikiLeaks, also conversation transcript]

On Tweeter @wikileaks said it has verified the authenticity of the records.

Two thing to note here:

  1. On Wikileaks release, Delia Velculescu‘s name is written in …Greek spelling “VelkouleskouUPDATE: WikiLeaks said it used the Greek spelling as it used Greek press reports for the name.
  2. It looks as if someone is doing some ‘eavesdrop’ on the IMF.

Excerpt from transcript: Thomson seems confident that the Brexit will indeed happen

Prompt was the reaction of the Greek government to the WikiLeaks release, Prime Minister Alexis Tsipras called an emergency meeting with Finance Minister Euclid Tsakalotos and Foreign Minister Nikos Kotzias on Saturday morning

The first off the record reaction by Greek government source is that the “Greek government will not let these games be played on the country’s back.”

A little later, Greek Government spokeswoman Olga Gerovasili said “Greece demands an official reply by the IMF.”

“We demand an explanation as to whether to creation of  bankruptcy conditions in  Greece is an official position of the IMF,” Gerovasili told media.

So far no reaction by the IMF.

The timing of the WikiLeaks release is very interesting as Delia Velkouleskou is supposed to come to Athens today and the program review talks to start again on Monday.

UPDATES & Clafirications by WikiLeaks:


Poul Thomsen: L’ etat c’ est moi!

Time difference issue, Thomsen in Europe does not dare to wake up Christine Lagarde, I suppose.

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  1. I was never under any illusion that the IMF and Troika members are anything other than common criminals. The problem has been with the mass media, who accord these people some sort of massive respect owing to their positions of power. Journalists have failed completely to hold politicians and bureaucrats to account.

    • Same goes for the US. Journalists have failed miserably to report any kind of truth to the people. Please don’t believe everything on cnn it’s mostly crap.

  2. What a surprise!? The IMF pursuing a policy that’s antithetical to the needs of the country it is “helping.” They’ve been doing this for decade. The IMF is a deeply anti-democratic organization that was set up to advance the interests of the more developed Western countries to the detriment of the rest of the world. Decisions have always been made made in a non-transparent manner and have regularly been used to promote policies that allow the rich and powerful to continue to pillage the rest of the world. A lot of the corruption one sees in the developing world is directly tied to the fact that the IMF is more than willing to support corrupt oligarchs as long as they implement policies that go against the interest of their own populations.

  3. Actually, in case of Brexit EU will have to cut massively all programmes, and Eastern European countries will realize that there is no money for cohesion. Immediate establishment of customs tax will be the reaction, as the Eastern Europe will profit massively from it.

    • If free movement of goods is abolished by and eastern EU country it will bring about the rapid end of the EU. I have been warning for some time that these ex-communist countries should never have been invited into the EU. This stupid error was made by European and Yankee right wing politicians, who claimed that they had “won the war against communism”.

      • Brexit will bring much faster end of the EU, because most programmes will be not anymore fundable after that. And actually it was the biggest mistake to include orthodox countries into EU because they do not have simply the Western working ethics

        • No, the problem is with former communist countries that do not have any ethics at all — Hungary is one. Probably Slovakia and Latvia also. They are not part of our European heritage, whereas the Orthodox countries are.

          I do not support Brexit, because it will damage the UK and the EU very badly. But this is the low level of debate from low quality media and brain-damaged politicians, mostly on the extreme nationalist Right.

          • Giaourti Giaourtaki

            Therefore Greek must become the common European language, it’s the easiest way for all to learn a common language that all other languages are rooted on and from the first minutes writing Greek they’ll recognize their heritage but it’s not sure if they are able to write at all.

  4. Giaourti Giaourtaki

    This Bundestag “threat” is a lame card because its vote was made for that Greece accepts the participation of the IMF and they all were in good faith that the IMF wants this; if they now quit this will not change anything as then it’s not Greece’s fault, but may be the IMF is just that stupid to understand or the German government was lying to its parliament.
    Also interesting could be if this works together with since 2016 again sinking sums in bank accounts that played last time a huge role; it’s just normal to run out of money but in their logic it speaks for longer capital controls.

    • Are the capital controls still there? Are the Greeks allowed to purchase stocks/money market funds to escape controls?

  5. To hell with the EUssr. The sooner it dissolves the better. Sooner Tsipras is gone the better. Greece needs a real leader like Vladamir Putin, to take Greece out of the EU

    • Giaourti Giaourtaki

      There can only be one USSR, right? So you want Putin to be leader of Greece, wow … Putin must be queer too because he rides naked in public, shit, but for sure riding is sodomy as horses must get raped because no real horse loves to carry any ass on its back.

  6. Debt relief is a thing that can help Greece but that would be hard to sell by the EU. The “bailouts” of Greece were partly funded by EU taxpayers. These EU taxpayers might (and should) get upset maybe when they find out they have been duped. Governments in the EU promised the bailouts would be paid back “with interest”. They’d rather let Greece go further down the drain than come back on that promise. Out of financial reasons but also out of political reasons. The banks that were saved with these bail outs are laughing all the way to the banks of course.

    Anyway, what is new with the IMF? They always played these games.

    • keeptalkinggreece

      if EU’s “taxpayers” think they can get their money back with new loans the risk is dangerously high that they don’t get their money at all.

      • Well KTG, EU taxpayers don’t get to have a say in this at all. The EU, ECB and EU countries make sure they don’t. Cause hey, who needs participation of citizens when you are trying to build an empire. At least in Greece you were consulted but then Tsipras stabbed you in the back. Anyway, the objective is to kick the can further down the road while in the meanwhile go for further EU integration. Cause that is the solution that EU ‘offers’ whenever there is a problem they cause.