{"id":182640,"date":"2015-07-16T18:37:00","date_gmt":"2015-07-16T23:37:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2015\/07\/16\/someone-at-the-imf-gets-it-but-it-aint-lagarde\/"},"modified":"2015-07-16T18:37:00","modified_gmt":"2015-07-16T23:37:00","slug":"someone-at-the-imf-gets-it-but-it-aint-lagarde","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2015\/07\/16\/someone-at-the-imf-gets-it-but-it-aint-lagarde\/","title":{"rendered":"Someone at the IMF Gets It, but It Ain’t Lagarde"},"content":{"rendered":"

In response to the mindlessly punitive deal for the Greek bailout, IMF staff have released a report that calls for massive debt write-downs<\/a>, and an anonymous source at the IMF implied that such a write-down is a requirement for IMF participation:<\/p>\n

The International Monetary Fund threatened to withdraw support for Greece\u2019s bailout on Tuesday unless European leaders agree to substantial debt relief, an immediate challenge to the region\u2019s plan to rescue the country.<\/span>

<\/span> The aggressive stance sets up a standoff with Germany and other eurozone creditors, which have been reluctant to provide additional debt relief. The I.M.F role is considered crucial for any bailout, not only to provide funding but also to supervise Greece\u2019s compliance with the terms.<\/span>

<\/span> A new rescue program for Greece \u201cwould have to meet our criteria,\u201d a senior I.M.F. official told reporters on Tuesday, speaking on the condition of anonymity. \u201cOne of those criteria is debt sustainability.\u201d<\/span><\/b><\/span>

<\/span> Debt relief has been a contentious issue in the negotiations over the Greek bailout.<\/span>

<\/span> Athens has pushed aggressively for creditors to write down the country\u2019s debt, which now exceeds \u20ac300 billion. Without it, Prime Minister Alexis Tsipras has argued the debt will remain a heavy weight on Greece\u2019s troubled economy.<\/span>

<\/span> But Germany and other countries, including the Netherlands and Finland, are loath to grant Greece easier terms, which are a tough sell to their own voters. German Chancellor Angela Merkel has ruled out a \u201cclassic haircut\u201d on Greece\u2019s debt.<\/span>

<\/span> The I.M.F. is now firmly siding with Greece on the issue. In a report<\/a> released publicly on Tuesday, the fund proposed that creditors let Athens write off part of its huge eurozone debt or at least make no payments for 30 years.<\/span>

<\/span> \u2026\u2026\u2026<\/span>

<\/span> In going public, the I.M.F. is making a tactical move, adding pressure to the negotiations over the bailout deal. But its aggressive position also complicates efforts to complete a deal, with Greece\u2019s Parliament scheduled to vote on Wednesday whether to accept the creditors\u2019 conditions.<\/span><\/p><\/blockquote>\n

One thing that we can be sure of, however, is that whoever leaked the need for debt relief was not the Managing Director of the International Monetary Fund Christine Lagarde, because she has walked back this assessment<\/a>:<\/p>\n

In general, when discussing large complicated institutions distinctions must be made between parts of this institution. The mainstream press is particularly bad at that kind of nuance because these organizations are already complicated: making further distinctions between IMF managing directors, IMF staff and the IMF executive board gets needlessly obscurant in their view. However, these distinctions are important. The report that was leaked two weeks ago and the latest update to that report was written by IMF staff and specifically \u201cneither discussed with nor approved by the IMF\u2019s Executive Board\u201d. Additionally, Christine Lagarde or her title \u201cmanaging director\u201d appear no where in this document. Thus to say that the \u201cIMF\u201d is saying anything in this report is deeply misleading.<\/span>

<\/span>The reporting of this latest update was even more muddled because it was combined with an anonymous statement from a \u201csenior IMF official\u201d by the Financial Times. The Financial Times lede read<\/a>s as follows:<\/span><\/p>\n

The International Monetary Fund has warned that it might not be able to participate in Greece\u2019s bailout if the programme does not include substantial debt relief, setting itself on a collision course with the country\u2019s eurozone creditors.<\/span><\/p><\/blockquote>\n

This (and the rest of the document) suggests to me that it is the Managing Director (ie Christine Lagarde) who goes to the board and ask for authorization. Is the anonymous official claiming to speak on behalf of Christine Lagarde? If so why is she not making this statement publicly? In my mind this anonymous official\u2019s statements only make sense in three situations:<\/span><\/p>\n

    \n
  1. Christine Lagarde is both unwilling to sign on to a deal the Eurogroup would currently agree to and unwilling to overtly and strongly pressure them to create a \u201cbetter\u201d deal they could sign. Thus she is aiming for a Grexit and no deal.<\/span><\/li>\n
  2. Christine Lagarde is willing to sign on to whatever deal the Eurogroup would currently agree to but wants to covertly pressure them to offer more debt restructuring. In other words it\u2019s a point of contention but not a dealbreaker.<\/span><\/li>\n
  3. Many on the IMF staff don\u2019t want Lagarde to sign whatever deal the Eurogroup is currently considering and specifically want much more debt restructuring. They have and are willing to leak things to the media to attempt to create this outcome whether by embarrassing their own Managing Director or putting indirect pressure on the Eurogroup.<\/span><\/li>\n<\/ol>\n

    To me option three seems like the most plausible. The same FT reporters (Peter Spiegel in Brussels and Shawn Donnan in Washington) reported over three weeks ago<\/a> that a \u201csenior [IMF] official\u201d says many staff at the IMF \u201cwould rather cut off their little finger\u201d than continue being involved in Greek bailouts. The use of similar descriptions (\u201csenior official\u201d and \u201cIMF senior officials\u201d) implies that the same sources at the IMF that said this over three weeks ago have been leaking the Debt Sustainability analysis and interpreted them for the press. This suggests a revolt among the rank and file of the IMF that doesn\u2019t extend to the people who will ultimately make the decision. Remember that the definition of a \u201csenior official\u201d is necessarily vague to preserve anonymity and could easily be someone who can\u2019t directly influence the decision made and certainly doesn\u2019t speak for Lagarde. Thus, in this scenario this statement makes sense as a calculated lie by IMF staff to influence events. This also may suggest that my intuition earlier this week was wrong: it may not be the Obama administration crafting a narrative with the leaked reports and selective interpretations of official statements, but simply off the record comments from these same IMF staff sources (or at least, a complicated combination of both these sources).<\/span><\/p><\/blockquote>\n

    What we are seeing here is a conflict between people who understand the underlying economics, and the “Very Serious People”, like Lagarde, or her predecessor Dominique Strauss-Kahn, who was in charge when the original deal with Greece was signed,  who are somehow operating out of a sense of European Union exceptionalism.<\/p>\n

    I would note that when DSK approved the original deal, he actually violated some basic IMF rules about requiring a creditor haircut, because, unlike dealing with, for example, Thailand, they know the creditors, and go to cocktail parties with them.<\/p>\n

    Tribalism is truly corrosive to good governance.<\/p>\n","protected":false},"excerpt":{"rendered":"

    In response to the mindlessly punitive deal for the Greek bailout, IMF staff have released a report that calls for massive debt write-downs, and an anonymous source at the IMF implied that such a write-down is a requirement for IMF participation: The International Monetary Fund threatened to withdraw support for Greece\u2019s bailout on Tuesday unless …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1010,1110,1004,978],"tags":[],"class_list":["post-182640","post","type-post","status-publish","format-standard","hentry","category-bureaucracy","category-european-union","category-finance","category-politics"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/182640"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=182640"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/182640\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=182640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=182640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=182640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}