politics for the 99%

Published on The Telegraph.co.uk, by Ambrose Evans-Pritchard, June 5, 2015.: No developed country has ever skipped a payment to the IMF – but Greek sources say they were provoked [incl. picture: Syriza had the money at hand. It chose not to pay as a conscious political choice; Video: How big is Greece's dept, 1.12 min; Graphs].

Greece is to take the drastic step of skipping a €300m payment to the International Monetary Fund on Friday, invoking an obscure mechanism in abeyance since the 1970s to bundle all debts due in June and pay them at the end of the month.  

It is the first time that a developed country has ever missed a payment to the IMF since the creation of the Bretton Woods institutions at the end of the Second World War.

The news broke after the Athens stock exchange had closed but a bloodbath is feared when the bourse opens on Friday. Yields on two-year Greek bonds spiked 63 basis points to 21.8pc amid mounting fears of a deposit run on Greek banks and the imposition of capital controls as soon as this weekend … //

… Ashoka Mody, a former IMF bail-out chief in Europe, said the Greeks are right to resist the demands. “Everything that we have learned over the past five years is that it is stunningly bad economics to enforce austerity on a country in a deflationary cycle. Trauma patients have to heal their wounds before they can train for the 10K,” he said.

“I am frankly shocked that we are having any discussion about raising VAT in these circumstances. We have just seen a premature rise in VAT knock the wind out of a country as strong as Japan,” he said.

“Syriza should recruit the IMF’s research department to be their spokesman because they are saying almost exactly the same thing. The entire strategy of the creditors is wrong and the longer this goes on, the more it’s going to cost them, as well as Greece.”

Yet the IMF itself seems to have a split personality. Its officials on the ground in Greece have been taking the toughest line against Syriza, though they do support Greek demands for debt-relief.

EU sources say the Fund wishes to extricate itself as soon as possible and appears willing to precipitate a breakdown in order to force Greece and the EU creditors to find a modus vivendi.

Asian and Latin American members of the IMF board have long resented what they regard as misuse of the IMF’s resources to sort out an internal family dispute within a rich currency bloc, an anomaly that ropes some of the world’s poorest countries into bailing out Europe.

They insist that the EMU creditor powers have ample means to resolve the crisis at any time they choose but are dragging their feet because they have yet to face up to the implications of their own monetary union.

(full text, picture, videos, graphs).

Related Links (today updared continuously):

• Greece vows not to leave the euro after IMF payment defiance – live updates, on The Guardian, June 5, 2015;
• Greece Defers IMF Payment as Merkel Says Resolution Far Away, on Bloomberg, by Nikos Chrysoloras and Andrew Mayeda, June 5, 2015;
• Greece debt crisis: Syriza hardliners succeed in winning delay in €300m loan repayments to IMF, on The Independent.co.uk, by , June 5, 2015: Greece has told the International Monetary Fund it will delay a debt repayment of €305m (£223m), due on Friday, in a move that buys time for the government to negotiate a deal with its creditors;
• The Economics of Parallel Currencies, interview with Jérémie Cohen-Setton, a PhD candidate in Economics at U.C. Berkeley and a summer associate intern at Goldman Sachs Global Economic Research, on naked capitalism, by Yves Smith, June 4, 2015: As Greece’s cash crunch continues and its negotiations are moving slowing and tending towards an impasse, it becomes more and more likely that the beleaguered borrower will issue some sort of scrip in order to fund operations while remaining in the Eurozone. How and how well might that work?
• Greek Crisis on YouTub-search;

on en.wikipedia:

• Greek government-debt crisis;
• Bretton Woods: the conference 1944; the system.