IMF and Greece, the breakup


The IMF has been on its way out of the Greek Rescue programme for a while now.

The band-of-bandits of Mr Tsipras is getting ready to celebrate ousting the IMF. Before you join in the dance in Syntagma Square, listen to my podcast on what the IMF is, what it does and what it did (and did not do) in Greece.

This is a February 2017 lecture on what the IMF is and what it does. The discussion on the role of the IMF in Greece is from 44’30” onwards.

Enjoy and feel free to comment using the discussion options in this post.



Is SyrizAnel turning Greece into a Failed State?


There is a sense that the situation in Greece is deteriorating rapidly, not only in an economic, but also in every other sense. The combined pressures of the migrant/refugee crisis, economic stagnation, diplomatic torpor and internal strife created and promoted by the government of Tsipras/Kammenos are leading things to the edge. In the summer of 2015 European officials voiced concern that Grexit could lead Greece to degenerate to a failed state. People are beginning to question whether Greece is heading there anyway, Grexit or no Grexit. The following discusses the proposition that Syriza and their far-right partners are turning the country into a failed state. Is this outlandish? Judge for yourselves.

Three elements can be said to characterize the phenomenon of the “failed State” from the political and legal point of view.

Firstly, there is the geographical and territorial aspect, namely the fact that “failed States” are essentially associated with internal and endogenous problems, even though these may incidentally have cross-border impacts. The situation confronting us then is one of an implosion rather than an explosion of the structures of power and authority, the disintegration and de-structuring of States rather than their dismemberment.

Secondly, there is the political aspect, namely the internal collapse of law and order. The emphasis here is on the total or near total breakdown of structures guaranteeing law and order rather than the kind of fragmentation of State authority seen in civil wars, where clearly identified military or paramilitary rebels fight either to strengthen their own position within the State or to break away from it.

Thirdly, there is the functional aspect, namely the absence of bodies capable, on the one hand, of representing the State at the international level and, on the other, of being influenced by the outside world. Either no institution exists which has the authority to negotiate, represent and enforce or, if one does, it is wholly unreliable, typically acting as “statesman by day and bandit by night”.

From a legal point of view, it could be said that the “failed State” is one which, though retaining legal capacity, has for all practical purposes lost the ability to exercise it. A key element in this respect is the fact that there is no body which can commit the State in an effective and legally binding way, for example, by concluding an agreement.

Let us test the above elements against the situation in Greece at the moment.

Does Greece retain sovereignty over its territory? Greece spends more than 2% of its GDP on military expenditure, yet it is unable to patrol the Aegean, in the short-distance crossings between Turkey and the Greek islands that migrants use to come over. NATO and EU’s Frontex is now tasked with securing the sea border. It is unable to patrol its land borders to prevent people smugglers operating, and is absent from the northern border with Macedonia (Idomeni) where there are now daily clashes between stranded people and the Macedonian forces. Yesterday Macedonian police is alleged to have crossed the border and fired upon migrants on the Greek side, sending rubber bullets and tear-gas into the Idomeni camp, which is well within Greek territory.

Is there a collapse of internal law and order? With courts frequently closed due to strikes by judicial staff and/or lawyers there is a significant problem with the administration of justice. Roads are frequently blocked, first by striking farmers, then by migrants. There are violent scenes between police and residents, migrants and police, rival political factions. There is a sense of lawlessness and desperation, especially in areas where welcome centres for refugees are being built.

Finally, is the state adequately represented? Can it conclude and enforce agreements? This is perhaps the area of greatest weakness. If anything Greece in the crisis years has proved an intransigent partner to its creditors. It is even more so now. Mr Tsipras and Mr Kammenos have betrayed every single electoral promise they ever made to the Greek people. They are no better with their promises to foreigners. They are insincere in their dealings with the country’s partners and creditors, discussing on the one hand, denouncing them as occupiers on the other. The latest farcical episode with Tsipras’ insurrection against the IMF proves beyond any reasonable doubt that there is no genuine negotiation going on. It is games, political subterfuge and personal interests.

What is the conclusion? Is Greece a failed state? Not just yet, but the continuation of the current course, and the current government is charting a path to failure. As Syriza’s own ministers proclaim: There is worse to come.



We Are Vlakes


To the delight of all Greece watchers, the show in the circus has kicked off again after wikileaks alleged leaking of discussions between Poul Thomsen and his IMF staff on the future of the fund’s participation in the Greek Bailout.

Supposedly Thomsen and Velkouleskou are talking about options for Greece and the role of the IMF in the programme. The gist of it is that the IMF wishes debt relief, or exit from the Greek bailout. Wow (as Prophet Varoufakis would have said). We only heard this before, what, a million times? Thomsen himself has said time and time again in his IMF blog that the Greek programme is barely sustainable and debt relief is needed.

Thomsen’s point is simple and correct. For Greece to have sustainable finances it needs severe reductions in expenditure (especially in pensions) or debt relief, or a combination of the two. As Germany (primarily) and Europe (ECB and Commission) are adamant on no debt relief, the burden of the programme falls on fiscal measures. The problem for the IMF as everyone well knows is that it is not allowed by its charter (and logic) to participate in a programme that does not add up. The current combo of fiscal measures and lack of debt relief does not work. It will not reduce Greek debt/GDP to 120% as required.

Two options therefore exist for the IMF, recognition that Greece will sustain debt/GDP ratios way above 120% for a long long time (and exit of the IMF from the programme), or debt relief.

Now, I am telling you what you know and this is not much fun. You know what is fun? The Greek government’s reaction! Yes, you got it, Tsipras is furious, at the IMF, for requesting… eh… debt relief for Greece.

You done laughing? Take a breath and read this:

“The Greek Government asks the IMF for explanations whether pursuing the creation of bankruptcy conditions in Greece, just before the British referendum, is the Fund’s official position,” government spokeswoman Olga Gerovasili told state television.

Commenting on the leak, Greek Prime Minister Alexis Tsipras told weekly newspaper Ethnos: “It seems that some people are playing games with an aim to destabilize us. We will not allow (IMF’s) Thomsen to destroy Europe.”

So, the IMF is trying to destroy Europe according to Mr Tsipras. You could not make this stuff up. This comes from the man who supposedly allowed Varoufakis to negotiate the country almost to death in order to achieve what? Debt relief.

Now, why is Tsipras doing this? Is he that stupid? What could be the agenda? Lets venture a guess. Merkel has agreed with Athens that they will let things drag on, turn a semi-blind eye to the lack of enforcement of measures required by the bailout and continue the drip-drip of disbursements. They want to do this because they are sick of Greece and have bigger fish to fry (refugee crisis, Brexit). The IMF will not play ball and insists on its projections instead of the European Commission’s rosier estimates. Something has to give. Tsipras has been ratcheting up the rhetoric against the IMF in recent months not because he does not want debt relief, but because he knows Merkel cannot allow it, and he cannot stomach the alternative (meeting the milestones and satisfying IMF expectations).

We end up therefore in this new farcical episode in this sorry saga. One has to smile. The usual band of useful idiots has jumped in to yell again #ThisIsACoup, evil evil IMF, baaaaad neoliberalism.

Goodnight and good luck






Grexit Daily News – 11 June 2015

grexit daily news

Dear Reader,

I am introducing a new section entitled ‘Grexit Daily News’ where I will post the most important event of the last day in this slow motion car-crash that is the Greek Crisis.

11 June 2015

The shocking event of yesterday was the departure of the IMF from the technical talks. This would be funny if it were not tragic, because it constitutes another instance of the Troika calling Syriza’s bluff.

As with the talk of referendum that ended unceremoniously when none other than Schaeuble declared it a brilliant idea (see here), the roaring of Syriza of the last few days that Greece should withdraw from negotiations, pull any compromise offers and reinstate the ‘Thessaloniki Programme’ as its proposal, ended abruptly when last night the IMF packed its bags and went home.

This is a little like a driver who goes into a rage when someone cuts them off, steps out of the car yelling “come out if you are a man”, for him to panic when the other guy does come out.

What another sad instance when Tsipras gets trapped in his own blackmail. I continue to despair.


A pedestrian carries his shopping past a graffiti sign reading "Cut The Debt, IMF Go Home" on corrugated metal fencing outside the University of Athens in Athens, Greece, on Monday, March 30, 2015. "The Greek government's strategy of isolating Germany and getting a majority of other euro-zone members to support another package against vague promises and no coherent reform plan has failed spectacularly," Erik Nielsen, global chief economist at UniCredit Bank AG, said in a note on Sunday. Photographer: Kostas Tsironis/Bloomberg

Reality is an ideological construct, or is it Mr Tsipras?


Do you remember those old Warner Bros cartoons where the coyote has run off the edge of the cliff, but his legs are still turning, and gravity has not sucked him down yet? This is what this week feels like for Greece.

Greece had taken its first step off the cliff when they failed to make the (one before last) payment to the IMF using SDRs. Both legs left the edge last Friday when Tsipras decided not to make another payment, opting to pay the IMF in one go at the end of the month. Pay with what? So long as an agreement is not reached imminently, this is anyone’s guess.

Hugo Dixon offered a good summary of what a compromise solution could look like (see here for full article):


Will such a compromise be reached? Is there time? I think a compromise will be reached, but things are so risky and tight (time-wise) now that the possibility of a Graxident is no longer a theoretical possibility but a real risk.

Mohamed El-Erian stated (see here) that witnessing this dysfunction, ordinary Greek citizens scrambled to do more to protect their dwindling savings. Partial indicators point to continued withdrawal of bank deposits, capital flight and a growing consensus that capital controls will soon be required. Are we really waiting till a full scale disorderly bank run is in order before the gravity of the situation becomes clear? Are we?

I am worried that the government is too busy fantasizing about restoring the relics of Greek statism (like ERT), to notice.

ERT dead