Germany shifts on IMF aid to Greece
Germany may be inching closer to acquiescence of an IMF assistance package for Greece, should the country fail to raise money on world markets, the Financial Times reports. The shift is apparently due to both legal and political concerns about allowing a euro-area bailout. A day ago, the FT reported that Italy, Finland and the Netherlands were now openly supportive of IMF assistance to Greece. It is worth noting that the FT and The Economist have, in editorials and Op/Ed pieces, supported IMF involvement in the eurozone, in contrast to continental European political positions.
http://www.ft.com/cms/s/0/3943e114-327f-11df-bf20-00144feabdc0.html
Yesterday was a bad day for the euro and the Athens Exchange: "The FTSE All-World equity index fell back 0.4 per cent from eight-week highs and the euro came under heavy pressure. The costs of insuring eurozone so-called peripheral economies against default were pushed sharply higher, and the Athens stock market fell 3.4 per cent."
FT article: http://www.ft.com/cms/s/0/414787b0-3259-11df-bf20-00144feabdc0.html
http://www.ft.com/cms/s/0/7b74f8ba-32da-11df-a767-00144feabdc0.html
New tax bill
Kathimerini reports on the new tax bill unveiled yesterday in parliament.
http://www.ft.com/cms/s/0/7b74f8ba-32da-11df-a767-00144feabdc0.html
Depending on which IMF package is extended, its involvement could be the best thing which could happen in Greece.
ReplyDeleteIt's clear that George Papandreou, despite his best efforts, has reached the limits of what is possible, and his political support is beginning to erode.
Serious, structural measures have not been taken. Yes, some public sector salaries and bonuses have been cut, but nothing has been done to cut the vast number of unproductive employees or organisations in the public sector.
Yes, a new draft tax law is being prepared, but nothing is done to seriously prosecute serial tax evaders, close illegal or unlicensed houses or restaurants or nightclubs, crack down on government networks such as the customs authority, which subsists on bribery, or take any other essential measures.
I also note that there is no real reason to turn to the IMF this year. The April-May tranche outstanding is EUR 10 bln: this can easily be refinanced, albeit at a 6% rate.
Inviting in the IMF with a mandate for real reforms may be the only way to proceed. All measures at present are temporary: the public debt continues to grow; the root causes of this are unaddressed; there remain at least EUR 40-50 bln in hidden debt off the government balance sheet.
Greece has major structural reforms required in education, the public sector, the private sector, healthcare and nearly every other domain which it has put off for far too long. The ingrained government response of "pass more subsidies" or "give them more loan guarantees" is no longer an option.
My reasoning is expressed in more detail here:
http://www.philip-atticus.com/2010/03/george-papandreous-third-act-of.html
Philip, I just read your comment and the linked post. I cannot find anything to disagree with. Frighteningly, I think you state it all in an even more civilised fashion than it deserves. We are not witnessing the quantum leap from a business-as-usual approach to a right-way-of-doing-business approach. We are just seeing an intensification of the business as usual approach, which is to penalise the salaried taxpayers who cannot escape with a euro of evasion, and the small businesses which generate about 90 percent of jobs. I am still waiting for the other shoe to drop.
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