Most political and financial demands are nothing but bluffs or lies.
For example, on May 14, I noted Greece “Demands” Debt Relief, Owes Troika €11+ Billion by July.
That “demand” lasted one week. On May 22, I wrote Despite Depression, Greece Forced to Hike VAT, Add New Taxes.
Today the IMF demanded Europe to Give Greece ‘Unconditional’ Debt Relief.
Greece’s European creditors must give the nation “unconditional” debt relief for the International Monetary Fund to provide new financing, the Washington-based fund said, laying out its position as Euro-area finance ministers meet in Brussels to discuss the bailout.
Euro-area governments should send a signal to markets that the nation’s borrowing burden is sustainable by providing debt relief before the next installment of Greece’s 86-billion-euro ($96 billion) bailout is disbursed, according to a preliminary debt-sustainability analysis of Greece’s finances that the IMF released Monday.
The IMF is proposing that Greece should be allowed to defer payments on its European bailout loans, underscoring key differences with euro-area lenders over the future of the Greek economy. While Germany has said IMF participation in the Greek bailout is indispensable, the IMF’s demands for debt relief may be too extensive for the Europeans to agree on.
“Providing an upfront unconditional component to debt relief is critical to provide a strong and credible signal to markets about the commitment of official creditors to ensuring debt sustainability, which in itself could contribute to lowering market financing costs,” the Washington-based fund said in the analysis.
The “or what?” theory says that without debt haircuts, the IMF will walk away from being a partner in this financial ruin of Greece.
Does anyone believe the IMF’s demand?
If you do, the second question is “Will the IMF insist on a haircut amount large enough to truly benefit Greece?”
The bonus question is “Timely enough to matter?”
I try to keep an open mind. It’s possible. But is it likely?
If the IMF does all of the above it will be the first time in history it did anything major right.
Of course, debt relief would come after the IMF agreed to impose preposterous terms it should have known upfront Greece could never pay.
For now, it’s clear Germany does not believe the IMF. Are we supposed to?
Mike “Mish” Shedlock