Courtesy of Mish.
IMF to the Rescue?
In the final minutes of the gunpoint “negotiation” between Greece and its creditors, the last two sticking points were IMF involvement and €50 billion in pledged Greek assets in return for another “bailout”.
Prime minister Alexis Tsipras said he could not give in on those demands. In the end, Tsipras bowed down and kissed the feet of German chancellor Angela Merkel and her finance minister Wolfgang Schäuble on those issues, and everything else they demanded as well.
Ironically, it could very well be the IMF that comes to the rescue and sinks this inane deal.
IMF Threatens to Walk
Please consider IMF Signals it Could Walk Away from Greek Bailout Deal.
In the three-page memo, sent to EU authorities at the weekend and obtained by the Financial Times, the IMF said the recent turmoil in the Greek economy would lead debt to peak at close to 200 per cent of economic output over the next two years. At the start of the eurozone crisis, Athens’ debt stood at 127 per cent.
“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,” the memo reads.
Under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the memo suggests it can no longer do so.
According to EU officials, Ms Merkel stood firm on the issue, telling the Greek premier there would be no bailout — and therefore “Grexit” from the eurozone — without a formal request made to the IMF for participation in a new programme. The final bailout deal states that “Greece will request continued IMF support” once its current IMF programme expires.
If the IMF were to walk away from the Greek programme, it could cause significant political and financial problems for Berlin and other eurozone creditors. Without the IMF’s imprimatur, German officials have said they would struggle to win approval for any new bailout funding in the Bundestag. German MPs must approve both the reopening of new talks and the final terms of the third bailout.
In addition, an EU official said that of the €86bn in Greek financing requirements, the European Stability Mechanism — the eurozone’s €500bn bailout fund — was expected to put up only €40bn-€50bn. …
