[Debate] IMF clashes with EU over Greek austerity
Riaz K Tayob
riaz.tayob at gmail.com
Thu Jan 12 14:11:22 GMT 2012
IMF clashes with EU over Greek austerity
by Dimitris Yannopoulos 12 Jan 2012
A long-brewing rift between the IMF and the EU over the failure of their
austerity programmes in Greece burst into the open on Thursday following
an informal IMF press-briefing of Greek correspondents in Washington.
Thursday morning reports from that briefing on Mega and Ant1 TV channels
said that the IMF mission staff in the troika sought to distance
themselves from a "counterproductive set of austerity measures" imposed
on the country under the insistence of the EU side.
The reports came in the wake of the talks which the IMF managing
director Christine Lagarde held on January 10 with German Chancellor
Angela Merkel in Berlin and French President Nicolas Sarkozy in Paris.
No official press conference or communique was issued after Lagarde's
shuttle meetings. But leaks in Handelsblatt and other EU newspapers on
January 11 said that the IMF head had warned Merkel and Sarkozy that the
parameters of the second bailout package for Greece agreed on October 26
Lagarde reportedly said that, given the deterioration of Greek fiscal
and economic data, the new bailout loan should be increased by "tens of
billions of euros" from its original 130bn euro loan target.
Furthermore, the IMF estimated that the Greek debt held by private
bondholders would require a haircut of more than 50 percent (or 100bn
euros) of its face value in order to become sustainable, especially if a
significant minority of investors refuse to participate in a "voluntary"
private sector involvement (PSI) deal.
The senior IMF sources in Washington noted that there were "unprecedened
delays" in the proper implementation of fiscal and structural reforms
linked to the first 110bn euro bailout programme. Instead, "horizontal
austerity measures are constantly being adopted that are leading
nowhere, whilst further wage and pension cuts are unjustified because
the only way to improve competitiveness is through growth-creating
market liberalisation, the opening of closed professions and productive
Rather than pushing through blanket wage cuts on underpaid groups of
employees in the public and private sectors, the IMF sources stressed
that selective reductions in exorbitant salaries and closure of wasteful
work stations needed to be introduced in dozens of public utilities
(DEKO) and other state agencies "in order to attract foreign investment".
"We have spoken repeatedly about reforms in the labour market to the
extend that certain elements in the structure of the Greek state
constitute a hindrance to the creation of new jobs," the IMF sources
were quoted as saying. "We have said that this leads to rising
unemployment and something must therefore be done about it," the sources
added, without including the private sector minimum wage or the summer
and Christmas bonuses among the measures that could overcome such
The senior IMF sources speaking under condition of anonymity also said
that IMF mission chief in Greece Poul Thomsen would probably not join
his counterparts from the EU (Mathias Morse) and ECB (Klaus Mazouch) in
their next inspection trip to Athens on January 17, underlining the
seriousness of the clash between the troika's twin pillars.
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