In a Financial Times article published on Saturday, Wolfgang Münchau accuses all the parties involved in the Greek bailout of failing to face the truth.
The truth that the Greek debt is highly unsustainable, as the staff of the International Monetary Fund have said recently. And when the IMF published their report, the Germans protested, the European Commission and the Greeks protested.
They all want to keep up the fairy tale of Greek debt sustainability for a little while longer Wolfgang Münchau writes. adding that once the Trump administration sends its representatives to the IMF board, the climate is likely to become even more hostile.
“The IMF will ultimately pull out of the Greek programme, leaving the Europeans free to mismanage the ongoing Greek crisis on their own”.
According to Wolfgang Münchau, there are no good and bad guys in this story. In the spring of 2015, in the months following Syriza’s election victory, Mr Tsipras’ government took the position that a fiscal surplus of 3.5 per cent is economically counterproductive and politically suicidal. But in the end he caved in to European demands, and accepted the 3.5 per cent target.
That Münchau asserts that no country has ever managed to maintain such a commitment over an almost indefinite period. Greek debt sustainability was thus premised on an obviously unfulfillable assumption. Furthermore the decision of the Tsipras government to side with Europe against the IMF was a a political miscalculation because the IMF was the only institution that advocated debt relief.
Germany made its participation in the Greek bailout programme conditional on IMF involvement. That gave the fund leverage. If the IMF now pulls out of Greece, one of two things will happen. Athens will either default on its debt this summer and be forced to quit the eurozone, or Berlin will accept debt relief just a few months before the elections.
The Greek crisis is only the most glaring example of failure to tell the truth Münchau concludes. There are many others. Italy’s membership of a monetary union with Germany is also transparently unsustainable. Yet no Italian prime minister has ever mounted a credible challenge to the way the system is governed.
When the truth dies, we should not be surprised if alternative facts are put in its place.
Full article here