It's not front page news because if it was, it would panic Euro investors. But very quietly, a review of Greece's compliance with IMF strictures regarding its deficit is not going well because the Greeks cannot agree on implementing the austerity measures demanded by the IMF.
In short, things are getting worse, not better despite the massive amounts of Euros dumped into the Greek economy.
This means that Athens will not be able to use its debt as collateral when borrowing from European banks. In effect, this is a default scenario that can only be avoided if the IMF pretends that Greece is in compliance - probably the main reason they are delaying the report on whether Greece is cutting its budget in order to be eligible for another infusion of cash from the IMF.
The sticking point is a 12 month guarantee of funding the debt. If they can't manage that?
"If that happens, he said, the IMF's rules could stop the fund from contributing its share of the next slug of bailout money, due to be paid out to Greece on June 29. The review, from the so-called troika of officials from the European Commission, European Central Bank and IMF, is due to be presented next week. ‘I don't think that the troika will come to the conclusion that this'-12 months of funding commitments for Greece-‘is certain,' said Mr. Juncker, speaking at a conference in Luxembourg."In that case, the IMF would expect other euro-zone governments to step in and cover the funds. Drumming up that financing would be hard in countries such as Germany and Finland, he said. IMF spokeswoman Caroline Atkinson said Thursday in Washington that the fund generally doesn't lend if there are gaps in financing, and that it was seeking reassurance from the euro-zone countries who are also lending to Greece. The IMF is providing €30 billion of the €110 billion facility, with the balance provided by euro-zone countries." (Wall Street Journal)
This is all brinksmanship. The ECB says Greece will get nothing if they default. The EU says that to get money the Greeks must make even deeper cuts, while a soon-to-be-completed audit will show they are in worse shape rather than improving. The Greeks have an obscure minister who is not part of the government say they might leave the euro. The IMF says they may not fund without further commitments from the euro members, which are going to be tough to get from Germany and Finland, at the least.
The German government has been proposing to fill Greece's finance gap without providing more loans, by asking holders of Greek bonds maturing in the next couple of years to agree to postpone their repayments. Yeah, like that's going to happen. Let's depend on the kindness of strangers.
Not to be outdone, Ireland is seeking more IMF-EU cash:
Ireland may have to ask for another loan from the European Union and International Monetary Fund because it will struggle to return to debt markets to raise funds next year, a government minister said on Sunday.
In comments to The Sunday Times newspaper, Transport Minister Leo Varadkar became the first cabinet member to cast doubt in public on Ireland's ability to raise cash on the bond market because of punishing yields demanded by investors.
"I think it's very unlikely we'll be able to go back next year. I think it might take a bit longer ... 2013 might be possible but who knows?" Varadkar was quoted as saying.
"It would mean a second program (of loans from the EU/IMF)," he said. "Either an extension of the existing program or a second program. I think that would generally be most people's view."
"Who knows?" indeed.
Taking a longer view of this crisis, even postulating that things will work out in the end, what does this say about democracies being able to discipline themselves to avoid catastrophe? I wish I could get a sneak peek of what historians 100 years from now will be saying about that.
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