Deutsche Welle: Is the IMF's Greek Mea Culpa motivated by anger over Germany's undermining of Banking Union?

09/06/2013 by

DW’s most recent Top Story focused on the IMF’s report of Greece, and its famous Mea Culpa. DW quotes my view that “… IMF economists are considering an exit from the Troika and are now paving the path for it… They don’t want to watch idly as Germany is trying to undermine the planned European banking union…” For the DW website click here. Alternatively read on:

An internal IMF report which admits grave mistakes in the first aid package to Greece elicits angry reactions in Athens. But Premier Samaras claims his country is experiencing a success story.

In particular, the International Monetary Fund’s admission of having underestimated the recession and unemployment in Greece has sparked rage in the country. “They are admitting that we are paying for their mistakes,” wrote the left-leaning “Editors’ Newspaper.” Best-selling daily paper “Ta Nea” sees the IMF’s report as a “confession of failure.”

The self-critical assessment originates from an internal IMF report that was leaked to the press on Wednesday (June 5). This was also the day the Greek bureau of statistics had to report yet another rise in unemployment: to 26.8 percent.

“A bunch of dilettantes at work”

Greek TV journalist and commentator Chryssa Tavoulari welcomed this serve. She sees the IMF’s approach as feebleminded. She points out that Greece is still bankrupt – a country where 60 percent of young people cannot find a job. “Europe has slept through the whole thing – it’s a bunch of dilettantes at work,” she complained.

Director, Division of Political Economy, Department of Economic Sciences, Faculty of Law, Politics and Economics, University of Athens<br /><br />
copyright: Yanis Varoufakis<br /><br />
Quelle: university of athens<br /><br />
copyright: Yanis Varoufakis<br /><br />
Eingereicht von Robert Mudge am 3.2.2012

The fact that the IMF not only mentions its own shortcomings but also the refusal of the Greek government to commit to reforms seems to go unnoticed in the debate. In addition, Greek media have been pointing out that chief IMF economists Olivier Blanchard and Daniel Leigh already found flaws in their Greece strategy in January of this year. They also assured that these mistakes would be rectified in time.

Now, the IMF is putting salt on the wound – and not without a reason, according to economics professor Yanis Varoufakis.

“The IMF economists are considering an exit from the Troika and are now paving the path for it,” Varoufakis told DW. “They don’t want to look at Germany trying to undermine the planned European banking union any longer,” Varoufakis believes.

IMF report as a chance

Lashing out at the German government is also not uncommon. However, the Greek government under conservative Prime Minister Antonis Samaras is refraining from such accusations and speculations. Finance Minister Yannis Stournaras has even welcomed the IMF’s self-critical assessment, saying that it offered “a chance to recognize mistakes in time so that they are not repeated.”

This ministerial statement does not come out of nowhere. With great interest, people in Athens have acknowledged the IMF’s conclusion that the February 2012 debt cut for private investors “should have come a lot earlier.” Now, according to Greek media reports, the IMF is considering an additional debt cut for Greece, which will in particular affect public creditors. Varoufakis believes there is no other alternative if Greece’s debt sustainability is to be guaranteed.

Protesters hold a banner which reads in Greek Revolt during a demonstration in Athens on Tuesday, Oct. 9, 2012. In heavy security measures and a mass protest, German Chancellor Angela Merkel arrived Tuesday for her first visit to Greece since the eurozone crisis began there three years ago. Her five-hour stop is seen by the Greek government as a historic boost for the country's future in Europe, but by protesters as a harbinger of more austerity and hardship.(Foto:Petros Giannakouris/AP/dapd)
Greece is still in crisis mode

The economist points out that Greece is still in a similar situation to 2010: the debt situation is not sustainable, recession is omnipresent and the bank system is dysfunctional.

Greece needs to take responsibility

Others, too, believe that further concessions are necessary to ensure that Greece can carry its debts in the long run. It is therefore not surprising that the country is more than fine with another proposed debt cut offer from the IMF- even it’s meant to correct past mistakes. At the same time, some analysts believe that Greece should not just place the blame on others but also accept responsibility. This would probably make its EU partners more willing to pass on some of their demands, with or without official debt cuts, according to political analyst Dimitris Tsiordas.

Strong emotions are out of place here – what is necessary is rational thinking, believes Tsiodras. The ostensible disagreement between the EU and the IMF is in Greece’s interest, because it can put pressure on those responsible to introduce additional debt relief. This wouldn’t even require a debt cut. Fellow EU members could help through interest cuts or by providing funds for the recapitalization of Greek banks via the European bailout fund, the Athens analyst explains.

Strong opposition against Prime Minister Samaras

Meanwhile, Prime Minister Samaras is trying to attract investors around the world and speaks of a “Greek success story.” The latter is not completely without foundation, as some improvements in the country’s situation have been observed in recent months. A primary budget surplus at the end of 2013 seems within reach for the first time, and the country has partly regained its competitiveness by cutting wages. Furthermore, a major tourist influx is expected this summer.

The last thing that Samaras needs right now is a reignited debate about the meaning and purpose of austerity policies. However, this is exactly the discussion that opposition leader Alexis Tsipras is trying to start in the wake of the critical IMF report.

“While the IMF is acknowledging failure, our prime minister is talking about a success story,” Tsipras told Greek television. “Both cannot be true – unless you consider a flawed policy to be a success story.”

Recent opinion polls seem to back his position. Tsipras’ left-wing SYRIZA party is running a head-to-head race with Samaras’ ruling conservatives. At the same time, criticism is also coming from the right-wing corner of the political spectrum: the extreme-right Golden Dawn party remains the third most popular choice and continues to gain supporters.

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