In a late night meeting in Brussels, the IMF surrendered to German demands and agreed that talking about Greece’s debt will actually begin only after the Third Bailout ends in 2018. This is not-by-coincidence after the German elections in October 2017.
Germany did not want any debt relief for Greece before the elections. This comes on the background of a strengthening of the right-wing anti-euro anti-immigration AfD party against Merkel’s CDU party.
The IMF had demanded debt deferral and also “unconditional and upfront” debt relief and settled for 2018. While the IMF’s board still needs to approve the deal, and the IMF’s participation, it seems that the Washington based organization has basically waved the white flag.
Greece will be granted the 10.3 billion euros in aid but paid a dear price in further tax hikes and social cuts. In addition, it committed to a 3.5% primary surplus target, something that is unfeasible also according to the IMF, which called this “counterproductive” and called for a maximum of 1.5% on the primary surplus.
But did Schäuble and Merkel indeed manage to kick the can to after October 2017? Everybody knows that Greece will miss its targets and that the crisis will erupt sooner. Also within the IMF, we can expect less support from member countries that see their funds in danger.
All in all, this is just another round in the crisis. The first bailout which was actually a bailout for French, German and Greek banks holding Greek debt is celebrating its sixth anniversary. Greek debt is higher, GDP is down 25% and unemployment is at 25%. Great success.
More: IMF tells Europe: Transfer union or big upfront haircut for Greece
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