The new delay in the disbursement of the tranche of 44 billion from the “troika” (ECB, EU, IMF ) to Greece poses serious problems of economic and political nature to Greece, the entire Euro zone, but also to the International Monetary Fund.
- it threatens the solvency of the Greek banking system, for whose recapitalization about half of the funds were earmarked;
- it opens the way to a new waves of contagion to Spain and Italy, which are far from being “safe” given the poor performance of their fundamentals (debt over GDP and growth) and given their political uncertainties;
- it destabilizes the Samaras’ risicated majority government who recently managed to get through Parliament the new measures required by the troika in a situation of strong social tensions: huge budget cuts (13.5 billion) and tough reforms of the labor market.
Contrary to Schäuble’s declaration, this delay can not be plausibly attributed to “technical reasons”, such as the contrast between the EU and the IMF on the timing (2020?) and the target (120%?) of the requested adjustment path for the debt over GDP ratio. The reason is political.
The refusal to accept the only possible remedy, a haircut to the value of the debt, two-thirds of which are in the hands of EU, ECB and IMF in exchange for a large privatization programme and a credible fiscal consolidation plan, can only be explained with the proximity of the German elections in September 2013.
The IMF, where EU countries are collectively the majority shareholder, would do well to reconsider the terms of its participation in the troika (= sleigh pulled by three horses in use in Russia). If one of the horses (the EU) refuses to run or runs on his own (pursues its own internal political agenda), the sleigh tips over. The loss of credibility of the troika is well illustrated in the figure above. The dotted lines in red indicate the subsequent forecasts of GDP growth made by the troika from 2007 to 2011. The black solid line shows the actual growth of GDP in Greece.
The international community can not afford having the IMF’s forecasts fall to the rank of a joke.