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My Big Fat Greek Bailout
Team Trump to IMF: Stand Your Ground on Greece

Europeans hoping that the U.S. might lean on the IMF for friendlier Greek bailout terms may be out of luck. As the Wall Street Journal reports, early word from the Trump administration suggests that Washington is telling the IMF to stand its ground, even if that means withholding financing for a third bailout:

Greece’s economic crisis is principally Europe’s problem, U.S. Treasury Secretary Steven Mnuchin said in an interview, offering the first hints on how the Trump administration will treat one of the eurozone’s most critical issues.

His comments, along with his conversation with International Monetary Fund Managing Director Christine Lagarde on Tuesday, suggest the new administration will encourage the fund to hold to its hard line on Greece, keeping it out of a third bailout for the foreseeable future. […]

The Trump team could offer the IMF cover as it faces escalating pressure from Germany to give Europe’s Greek bailout credibility with fresh financing. If Washington signals it won’t allow the IMF to tweak its numbers on Greece to make Europe’s bailout work—like it did in the first two programs—the fund will have backing from its most powerful shareholder to stand firm. […]

Gerry Rice, the IMF’s top spokesman, made clear Thursday the fund won’t offer Greece any new cash until Athens delivers on pension and tax overhauls and Europe gives the IMF a “credible” and “specific” commitment to Greek debt relief.

As we have noted before, the IMF has lately become the scapegoat for EU leaders frustrated with their own colossal failures in resolving the Greek debt crisis. The fund’s gloomy forecast on Greece’s unsustainable path and its insistence on debt relief has irked Eurozone leaders, raising the possibility that the IMF would pull out of a new bailout and leave the Europeans to figure it out for themselves. Judging by Mnuchin’s comments, such an outcome would be perfectly acceptable to the new White House.

There is still a chance the IMF could cave on its demands for debt forgiveness, despite Washington’s signals to hold firm. IMF Head Christine Lagarde recently met with Angela Merkel and emerged talking about Greek debt restructuring rather than outright debt forgiveness. That shift seems to be a tacit concession to political realities in Germany, where the prospect of debt relief remains politically toxic, no matter how necessary it is from a fiscal perspective. As a new poll shows, over 46% of Germans oppose Greek debt relief, while 3 in 10 want Greece to leave the Eurozone outright. These are hardly the kind of numbers that give Merkel an incentive to write off Greek debt, especially as she prepares for election season.

If Germany won’t budge, then, the key question is whether the IMF will—and the signals coming from the White House could give the fund new reason to hold its ground.

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  • Jacksonian_Libertarian

    The sooner the Euro and the EU disintegrate the better for all involved.

    • Ellen

      Yes, in the age of Trump, this is the operative point. The travesty that the UN is (anti-US and anti-Israel) and the fact that nothing has been done to oppose this sordid state of affairs is due to the liberal elites’s idiotic commitment to operating behind a facade of multi-lateralism. The UN provides that facade. Nicki Haley recently gave a speech at the UN which shows that Trump is no longer willing to play that dirty little game. The US should not be paying for an institution that spits in the face of US interests and promotes hatred of Israel because the Islamic states are so wounded by their manifest civilizational failures.

      The EU is another such institution. Time to pull the plug on the endless rounds of debt writeoff, etc for failing European states. Brexit was first, hopefully Nexit will follow (or Frexit), and that will be the end of the liberal, pseudo-universalist worldview. Trump is the vehicle for that, with all of his imperfections.

  • ljgude

    Before Brexit, keeping the Greeks in at any cost made some kind of sense to ‘preserve the union’ and hope for the best. But after? Letting Greece go back to the Drachma will not cause a ‘domino effect’ at this point and give the rest of the countries behind on their debt a fair look at the consequences of reverting to their old currencies. That may prove the way forward for the EU, but I doubt that the Germans and Eurocrats will ever come round to that view.

  • Angel Martin

    “Europeans hoping that the U.S. might lean on the IMF for friendlier Greek bailout terms may be out of luck. As the Wall Street Journal reports, early word from the Trump administration suggests that Washington is telling the IMF to stand its ground, even if that means withholding financing for a third bailout:”

    This writer is either confused or writing very unclearly about the position of the players in the Greek Debt mess. The IMF has become realistic about the Greek debt situation, and is supporting the position that Greek debt is not sustainable without significant debt forgiveness.

    http://www.telegraph.co.uk/business/2017/02/07/eu-faces-crisis-imf-warns-greek-debts-explosive-path/

    As such, the IMF has said it will not contribute more lending to Greece on top of current debt levels. So it is actually the IMF that supports “friendlier Greek bailout terms” (friendlier, at least, for Greece).

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