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IMF divided over Greece: Program Exit or just Debt Relief?

The International Monetary Fund is divided over the Greek Program. Poul Thomsen, the head of IMF’s European Department,  now openly supports that the IMF should overall exit the Greek Program.

In his report, Thomsen contends that the problem is not only economical because Greece is considered as “non repairable” but also because the European project develops, the problem is profoundly political and that no Greek government will be able to save

He is skeptical if Greek reforms under the current euro zone bailout can deliver the fiscal targets set by the lenders.

According to IMF’s own calculations,  he reforms Greece has undertaken would produce a primary surplus — the amount of money the government has before debt servicing — of 1.5 percent of GDP.

The euro zone’s program, however, expects these reforms to produce a surplus of 3.5 percent, Thomsen said.

“We can support a program that is based on a primary surplus of 1.5 percent. If Greece and its European partners want to agree on a program with a more ambitious fiscal target, we need to see how it adds up,” he said.

“We do not think that the program that is on the table is consistent with more ambitious targets, and I am not talking about targets for next year and the following year, but over the medium term,” he said.

He said the IMF was preparing a Greek debt sustainability analysis (DSA) which it would release in December, along with its regular evaluation of the Greek economy.

“If you want to have a DSA that has a (primary surplus) target higher than 1 .5 (percent of GDP) we want to see the reforms that justify that,” Thomsen said. via Reuters

Poul Thomsen presses for further ‘reforms in pensions’ which translates in more cuts as well another reform in taxation system, which will exterminate what Thomsen calls “large exemptions from taxation of households.”

He said that while Greece undertook a pension reform, it only reduced the annual 10-11 percent of GDP deficit of the pension system by one percent of GDP.

Athens still had to address the issue of exceptionally large exemptions from taxation of households, which in Greece reached 60 percent, compared to single digits elsewhere in Europe, Thomsen claimed.

However, IMF’s Managing Director does not show signs of intention to abandon the Greek program, she just presses Greece’s European lenders, particularly German Finance Minister Wolfgang Schaeuble to proceed with debt relief.

But the German government has clearly stated that there cannot be any discussion on the issue before the German elections in September 2017. Of course. The conservative wing of German coalition, the CDU/CSU, cannot afford to risk losing more voters due to another hot potato like “more concessions to Greeks”. It considers the Refugee Crisis as a problem big enough to push its arch-conservative supporters to the arms of xenophobic AfD.

PS I remember that we have been saying already in the first and the second Memorandum of Understanding in 2010 and 2012 designed and drafted by the IMF that the projections of primary surplus targets were not realistic. The IMF insisted, it later admitted its errors. Too late for millions of impoverished Greeks. It’s now the turn of Schaeuble to admits errors but for the time being he is still whistling alone in the woods.

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  1. Oh please…The IMF divided…Program exit…Debt relief…I haven’t heard so much hogwash in a while. The IMF is not and has never been interested in either providing debt relief for Greece or in exerting significant and meaningful pressure on the “Institutions” (or whatever you want to call the unholy alliance of the EU, the ECB and the EC) to do so themselves. Instead what the the IMF constantly does (and has been doing since the beginning of the crisis) is tangle in front of successive Greek governments the promise of putting pressure on the Institutions to provide debt relief in some yet to be determined future. But the price for this promise is of course for the Greeks to make additional efforts TODAT. If you look beyond the rhetoric, you will clearly see that the IMF has done absolutely nothing to pressure the institutions except…talk about how they are pressuring the institutions. They have done absolutely nothing to get the institutions to revise unrealistic projections and estimates except…talk about how these projections and estimates are unrealistic. In the end all they actually DO (as oppose to talk) is pressure the Greeks to make more sacrifices in order to achieve goals that the IMF itself has deemed to be unrealistic.

    The sooner the Greeks realize that the IMF and the institutions are pulling a classic Good Cop-Bad Cop con on them, the better off they will be. If the Greek government actually thinks the IMF will stand up for Greece against the institutions, it needs to get its head examined.

    • Well said!

      This is the umpteenth rerun of the fantasy soap opera; instead we should check back to what follows each segment.

  2. The moment when politicians are prepared to admit errors is the few seconds before the executioner’s axe chops off the head. Other than that, they will carry on denying that the sky is blue, claiming that black is white, etc etc for as long as they live. This is why democracy is doomed as a form of governance, and the most likely outcome of this mega-catastrophe is some sort of feudal dictatorship dressed up with the theatre and pretence of democratic institutions. Everywhere, democracy is failing or has failed.

    • Greece is already there. It is just a husk.

      With its sovereignty gone on all fronts, all Greece has left are the dried up and empty shells of its former institutions – i.e. parliament, constitution, judiciary, armed forces etc. These husks are maintained not for Greeks’ sake, but the West’s “reputation”. This pantomime of Western “Democracy” is maintained for two reasons:

      (1) To legitimize its further spread outside the West via R2P and “humanitarian war” i.e. bringing “Democracy” to Iraq, Libya, Syria, Ukraine etc…


      (2) to hide the fact that Western oligarchs & their agencies are now cannibilising the West itself and view its wealthy and resources as Fair Game.

      • So right.
        And the canary in the mine (Greece) survived, therefore more scope for further looting by the Troika and the Nazi (version II) executioners. The scope is clear: the land empty and acquired for free. As for the IMF, as long as the Lagardes and the Thomsens of this world get their fat pay checks per month, they will gladly destroy millions of people without mercy.