Vindicated, while Lagarde emerges a loser? – David Marsh in MarketWatch

In his Monday column on MarketWatch David Marsh entitled his opinion piece: “Varoufakis vidicated, while Lagarde emerges as a loser”. Of course the point is not whether I have, or have not, been vindicated. The crucial issue concerns the viability, or otherwise, of the latest Greek deal. From day 1 I have been arguing that Ms Christine Lagarde has an interest in a negotiating impasse (between Greece and its creditors) so that she does not have to confess to the simple fact that the IMF’s staff will rebel if she signs another unsustainable loan agreement with a country whose debt is as unpayable as they come. For David’s analysis, read on…

Something is going badly wrong in relations between Christine Lagarde, the International Monetary Fund’s managing director, and the staff of the institution. Three times this month, in politically fraught negotiations over a Greek debt package, the IMF staff has disavowed its management over providing more loans to Greece as part of the third bailout deal of €82 billion to €86 billion that euro leaders stated they sealed on July 13.

As Oscar Wilde might have said, to show one such contradiction might be a misfortune, two appears like carelessness, while three looks downright hapless.

The fissures, as well as reinforcing uncertainty over the Greek imbroglio, cast doubt on Lagarde’s utility in attending European debt meetings, where she appeared to endorse decisions later rejected in Washington. The bizarre nature of IMF divisions may influence a top-level government decision about whether to renew Lagarde’s five-year term that ends in July 2016.

Although Lagarde has some support for her incumbency, she is coming under criticism from inside and outside the organization for displaying style rather than substance.

The latest setback, revealed last week by the Financial Times, is the most damaging. The IMF’s board was told on Wednesday that Greece’s unsustainably high debt and shortcomings in realizing reforms preclude a third IMF bailout. This could fatally unhinge the package, since German Chancellor Angela Merkel has ruled out further funding unless the IMF participates in new loans from European governments.

The big question is whether legislators in Germany and other restive North and Central European creditors will start to walk away from a deal that is bound up with so many onerous and mutually incompatible conditions as to be well-nigh unrealizable.

The latest news from Washington vindicates the analysis of Yanis Varoufakis, the former Greek finance minister, who said in an teleconference sponsored by the Official Monetary and Financial Institutions Forum on July 16, ”According to its own rules the IMF cannot participate in any bailout. They have already violated their rules twice to do so. But I don’t think they would do it a third time. I think they are kicking and screaming that they are not going to it a third time.”

Varoufakis’s comments, in a telephone conversation with OMFIF that formed part of a “Greek day” of briefings for international investors, were made under the Chatham House rule, under which the source of shared information should not be reported.

In the interest of transparency, and in line with our organization’s structured policy on information transmission, OMFIF published the Varoufakis recording on July 27. On July 28 OMFIF published on our website the full transcript — along with recordings of the other “Greek day” conversations — after parts of the conversation appeared (in accurate form but without OMFIF’s authorization) in the Greek press on July 26.

Read the transcript of the conference call with Yanis Varoufakis, David Marsh and Norman Lamont.

In the July 16 telephone conference, with Lord (Norman) Lamont, former U.K. chancellor of the exchequer and an OMFIF senior adviser, and myself, Varoufakis said, “There is a very serious danger here that the Greek Parliament … will push through Parliament these prior actions [for a loan] but then, at the end of the day, the ESM [European Stability Mechanism] and the IMF will not be able to coordinate so as to provide that huge loan.”

Varoufakis continued, ‘Not that I want that huge loan to be provided … but I think there is a major tussle between the institutions: the ESM, the European Commission, the IMF and [German finance minister] Dr. [Wolfgang] Schaeuble. Dr. Schaeuble and the IMF have a common interest, they don’t want this deal to go ahead. Wolfgang quite clearly said to me he wants Grexit [Greek exit from the euroEURUSD, +0.2466%  ], he thinks that this ‘extend and pretend’ is unacceptable and this is the one point where he and I see eye to eye. I agree with him, but for completely different reasons of course. The IMF does not want an agreement, because it does not want to have to violate its charter again and to provide new loans to a country whose debt is not viable. The commission really wants this deal to go ahead, Merkel wants this deal to go ahead, so what has been happening over the last five months is now projected into the very short term — only it is on steroids, and that is this complete lack of coordination between the creditors.’

The IMF already demonstrated fault lines with the other creditors when a Fund official briefed journalists on July 2 that Europe should agree to massive and necessary Greek debt relief. The statement, just a few days before the Greek referendum on a former (and less draconian) bailout package, backed Athens’ own policy views on debt, and strengthened the “No” vote in the following referendum.

As I commented at the time, “The IMF guillotined itself. Christine Lagarde, its hyperactive managing director, should have stayed in Washington masterminding operations rather than uselessly and visibly trail blazing around Europe.’

The divisions appeared to deepen further when an IMF debt-sustainability analysissurfaced on July 14 stating that the latest deal would push Greek debt to 200% of gross domestic product and that it could not participate unless the Europeans offered debt relief.


  • Well said! So how to explain the 200+ idiot Greek MP’s who voted this nonsense……. Should they really be holding public office at all?

  • Professor Varoufakis has achieved what we do not dare dream of as academics. He has achieved extraordinary fame. Yet, upon achieving it he became lost. The author of the Global Minotaur is now walking his own maze. Who has Varoufakis become and what does he seek to achieve? Is he still an academic? Has be become a politician? If he is a politician, what is he trying to accomplish? Or is he just fond of seeing himself on TV and on covers of magazines? If it is the latter, how horrible will it be when the fame passes and the world moves on.

    As I explain here ( ) Yanis is in the process if being forgotten, not vindicated.

  • 1. Lagarde is nothing more than a byproduct of Merkozy.
    2. You should never have thought of the IMF as an allied entity(or treated them as such) just because debt relief is their first priority.
    3. Schaule’s plan for Greece is to install a national unity government so that official implication is mandatory and the Berlin collaboration stigma becomes uniform across the board. Therefore Syriza’s future as a party is doubtful and its anti-MOU stance is now history.
    4. No one is articulating what the next step ought to be. Everybody is obsessed with securing their name in history and the “I told you so” self-image restoration.
    5. Finally and most importantly: What is Greece’s optimum strategy? Not tactics but strategy.

  • Since 2010, YV has been stating the obvious. A position supported by progressive and conservative economists alike. Only people who were delusional, or put ideology above numbers and reason, or had hidden ulterior agendas could insist that the “pretend and extend” approach could resolve the Greek financial crisis.

    As Yanis and many others pointed out, however, the big problem now is that it will be very painful to get out of Euro’s “roach motel.” Those who accuse YV of naiveté, bad negotiating tactics, self-promotion, or “high treason” fail to recognize the magnitude of the additional misery that a “Schaeuble-type final resolution” of this tragedy will bring to the Greek people, particularly to the ones who are the least culpable for this mess.

  • Yanis Varoufakis,

    Far as I’m concerned you can go f*ck yourself. The IMF and other Troika members are wrestling with a very difficult problem, namely what to do about a bunch of liars and cheats sometimes knows as “Greeks”: liars and cheats who are begging for free money, or loans at below market rates. Everyone knows the Greeks on past performance may well not repay those loans.

    For you to mock Troika members on account of disagreements amongst Troika members as to what do in those circumstances is the height of impertinence. If I applied for a loan from a bank and the bank staff had difficulty deciding on whether to grant to loan I would not publically make fun of them: I’d try to assist them in making the decision.

    • Wow, you managed to insult not just Yanis (who so gently allow for free comment here) but also a whole nation (Greece) in what can only be understood as a racist stand. I must remind you that Greeks are the Europeans who work hardest (longest weeks) of all, while Germans and Dutch are the ones who work less. I must also remind you that the money is not meant to go to the Greek people but just to service the debt and hence save the German and other Western banks (British, North American, etc.) All this has all been done with the interested blessings of Mario Draghi (head of Goldman Sachs in Europe when the toxic loans were made) and the cooperation of the whole European political establishment, who only seem to care about the interest of the banksters. It is a scam and has been so since day one, hence extend and pretend is just feeding the bubble of the scam itself.

      Your attitude, Musgrave, seems utterly fascist in all senses. You only seem interested in issuing racist insults and defending a rotten oligarchic establishment that is the only real parasite here. I would recommend you to be less of a Troika bootlicker and more of a critical thinker, Europe depends on all us being actively critical and not just bowing to the bankster mafia as we have done for way too long.

    • What is it about open democratic dialogue that makes you conservative types so furious you even ridicule yourself by using that kind of language against somebody who has never done you any harm?
      You have done nothing with this comment but proven your utter ignorance.

      Is it so painful to be reminded of one’s intellectual incapacity to understand simple principles of political economics? Such as: Greece is a nation and not some private person “applying for a loan” and the Troika is not an ordinary bank but a cartel of technocrats without any democratic legitimization and with the one single purpose of saving private banks from their own bad business decisions?

      It seems there is no end to the amount of stupidity among people like you who applaud and enable exactly the kind of politics that will bring the whole project of a united Europe to certain doom.

    • Dear Sir(?), It just so happens that we Greeks gave you and your kind the right to speak your mind. This way we can find out what actually is in it. I do not like your insults, but you can continue to shoot your mouth as long as there are Hellens and Hellas.

    • Dear Mr. Musgrave,

      I see that you must have used older dictionary to look up the term Greek, which is defined as liar, cheat and swindler at cards. The term Greek however, is another misfortune we owe you, our European -colonialist may I add- partners. In our country, we call ourselves Hellenes and not Greeks which some ignorant Latin came up with about 2000 years ago.
      Now if you think that we cheated you, well that is too bad. For 2 centuries, we fought your battles, sending a great many of our young men to their, unmarked for most, graves so that you can preserve your rights and your glorious “United Kingdom”. In return we not only got absolutely nothing. It was your external policies that contributed to the decimation of ecumenical Hellenism present in Asia Minor, the Middle East and North Africa, and if that was not enough we now have to endure your snotty comments. So if you have a shred of decency, please spare us.

  • Yanis it would be extremely helpful to the Greek people if Schauble’s proposal for Grexit is spelled out in detail. We cannot find any information about it.

    There are obviously a number of ways to grexit if it comes to that. Would you please consider writing an article describing the optimum way, and contrast it with Schauble’s proposal?

    • Another case of blindly forcing cookie cutter solutions conceived for problems of other nations, but irrelevant and even possibly detrimental to the social and economic needs of the country that is forced to accept and apply them.
      Greece is not Ireland, it is not Spain. Adaptation is the key, and if the EZ and Mme Lagarde want the Greeks to take ownership, they should allow them to decide how best to adapt these reforms to their situation. Although they keep saying they did, every time the Greek delegates proposed any adaptation of equal value, it was refused. So, what does that say?

    • Pantelopoule:

      You keep making the mistake that somehow the actual purpose of the players involved was to help Greece. Never such a premise existed. This is a 100% ideological fight and the purpose of its latest chapter was to create complicity from the Left. Given that Syriza was refusing to engage, Syriza was brought to power so that it could be crushed publicly and without mercy.

      And so it did.

  • For the benefit of the above commentators who don’t like my use of the word f*ck, I unreservedly withdraw it, and hereby replace it with the remark made by Christine Lagard, namely that Greek negotiators have been behaving like “children”.

    Second, I do appreciate the freedom of speech that Varoufakis allows on this blog. Actually most blog owners (about 75% in my experience) allow free speech, i.e. about 25% have a habit of not publishing comments they don’t like. I intend doing an article on my own blog on this subject some time and listing the blogs where 100% free speech is not allowed.

    Re my description of Greeks as “cheats and liars” that’s not a bad description. Reason is that tax returns made by Greeks, rich and poor are joke by the standards of other European countries. For example the income declared by the average Greek lawyer only just covers his/her mortgage payments. Put another, Greek lawyers claim to spend nothing on food, transport, holidays, clothes and so on. See:

    In most European countries, tax returns of that sort would result in employees in tax offices nearly dying of laughter, followed by lawyers being threatened en masse with jail sentences.

    Plus there is the well known fact that Greece cheated its way into the EZ in the first place, assisted by Goldman Sachs.

    • The title of this article you posted reads, “Misrule of the Few: How the Oligarchs Ruined Greece”. For heavens sake, use your intelligence, it says, ” the few”, and “the oligarchs”, not the many, not the average citizen. The term Oligarchy, derives from the Greek words, oligos, which means small, and arché, which means the principle or rule. In other words, the ruling few. How does that relate to your statement that all Hellenes (i.e. in your parlance, Greeks) are liars and cheats? Or do you think that the entire 14 million or so population are the few and part of the oligarchy? Use your common sense and recognize that your overgeneralization has nothing to do with objectivity but reflect your own subjective ideological position. The poor are not cheaters nor liars, because they have nothing to protect. If they were cheaters and liars, they would have voted in the previous government that guaranteed the status quo, where they could continue to lie and cheat and plunder. If you want to grind your axe against anyone, grind it against the predecessors of the Greek government that cloaked the oligarchs who are of like mind as yourself. Then again, please do not tell me that you would have done differently if you were in their position. You and they are of the same stock.

    • There seems to be no limit to german hipocrisy.

      Germany’s largest conservative newspaper (FAZ) just reported that during a telephone conference on the euro working group level, a high ranking official of the german finance ministry demanded that the Greek government must first deal with its refugee problem, before negotiations on the third package could be brought to a conclusion.
      Of course the ministry later denied that such a statement had been made.

      At the same time history is in the process of repeating itself as all over Germany racist mobs are harassing asylum seekers, protesting against an alleged ‘flood’ of refugees and burning refugee shelters, while our glorious leadership has nothing better to do than try to expedite deportations and push for an extension of the number of mostly eastern european countries that are considered safe havens for refugees from which they have no right to travel to the federal republic.

      It looks like the hipocrites in Berlin are trying to hit to birds with one stone by catering to the racist sentiment that seems to have become acceptable again within the german middle-class and at the same time shifting the blame for the increasing number of refugees onto the lazy, incompetent greeks.

  • The Greek Government voted today for the 3rd bailout deal memorandum. Incredible! Yanis, it is time for you to bail out. This is a national disaster. If implemented, the impact to the people of Greece will be no less than a Grexit. Failing to implement to will lead to Grexit.
    Does anyone here understand Kazakis’ position? He insists that the only way out is to renounce the bailouts and the debt as onerous and illegal, and step out of the Eurozone. Some insight please?

  • Let make it simple. Syriza failed horribly in its mission. What to do next?

    So find somebody to love and stay away from the ratzilla land where Schauble lives. I’ve had it with these criminals.