What Will The IMF Do?

In accordance with its statute and prevailing rules, the IMF cannot extend loans if the debt of the country under a programme is not sustainable. It is quite obvious to everyone, except Angela Merkel and Wolfgang Schauble, that Greek debt is not sustainable, that the programme is failing miserably, that the ultra stringent austerity imposed on this hapless country has acted like the proverbial sledge hammer, in that even the healthy parts of what used to be the Greek economy, have collapsed. There is no longer any hope for recovery for Greece under this inhuman regime.

Yet again the IMF is fudging. It magnanimously granted Greece until July (this month that is) to deal with the short fall of what is it, 4 billion or so, before it is constrained to cut off this senseless financing of an unsustainable debt. There is no way this can be done. Greece has already been pushed way beyond her limits. Even if a fudge is laid out on excel sheets, based on continuing to raise taxes on non existent incomes, in a few months at best, the short fall will have grown even more rather than shrunk. For obvious reasons, that any first year economics student will know.

To show how obvious this should be: the shortfall that has been discovered all of a sudden derives from the health service. Expenses have shot way over the budget and must be brought in line. But how? The simple reason why this occurred is that before the crisis most Middle Class patients did not use the public health services very much in that they used private health insurance, or footed the bill out of pocket for medication and certain tests that were not too costly.

Now however, since this catastrophically destructive (as opposed to creative destruction) sledgehammer austerity has just about annihilated the middle classes in Greece, more and more people are having to resort to public healthcare, because they can no longer afford anything else as they used to. As a result, a far greater burden on public healthcare arises. But in this vicious circle of German inspired logic, what does the troika demand? More taxation, more cuts to income, in other words it wants to exacerbate the causes that led to the shortfall in the first place, rather than help mend them in any way.

If there were any integrity in the IMF they would declare right now, that Greek debt is not sustainable and that they are therefore obliged to pull out. Several northern Eurozone countries have said that if this happens, they will reconsider whether to continue the financing programme. Which is in fact the only sensible thing to do. The only thing to be done now is to negotiate a write down of Greek debt in conjunction with an orderly exit of Greece from the Euro.

But will the IMF do what it knows it must? No. The IMF has chosen to play Politics rather than Economics, as evidenced by the most recent sham in the case of Greek debt sustainability when Greece was once again coerced to buy back its already haircut bonds, and the result was most deceitfully declared a success, not least by Christine Lagarde, the Marie Antoinette of the current historical tragedy being played out. It wasn’t a success, however. Greek debt in absolute numbers is greater than what it was at the beginning of the crisis, let alone as a percentage of GDP.

So the reason why the Greek people have been condemned to a cruel, slow and lingering death is to accommodate the personal ambitions of one woman. Angela Merkel. Which is the reason why both she and Schauble have raised the telescope to their blind eye so they cannot see the unsustainability of Greek debt and the complete disaster of their programme. It would harm their own personal re election prospects.

For some reason no one dares endanger Frau Merkel’s chances of getting re elected. To be fair, there is fear of what might happen to the Euro if Greece leaves the straight jacket of the single currency. So Greece and the Greek people are being sacrificed for the survival of the Euro. But instead of rewarding the hapless country for this sacrifice for the greater good of the rest of Europe (if that does happen), it is being punished with greater and growing cruelty.

Now, though the Greeks are done for, flat on their backs with no will to fight back, there are certain laws of history and nature that are only ignored at one’s peril. This is one such case, where this dastardly hubris at Greece’s expense will bring on a Nemesis commensurate in might with the viciousness of the hubris.