The IMF Is Right About Greece

Europe’s finance ministers are due to meet Monday in an effort to break the impasse over Greece and its debt. What ought to happen was spelled out last week in a leaked letter from the head of the International Monetary Fund to the group. It wasn’t what the ministers wanted to hear.

Managing Director Christine Lagarde said the IMF cannot support a plan of the kind Europe’s ministers have been demanding — a plan that requires promises Greece can’t or won’t keep and that postpones, yet again, agreement on debt relief. The IMF’s implicit threat to withhold its support and walk away from the talks is justified.

Essentially, the euro zone ministers and Greece’s government have been feeling their way toward an agreement that neither side thinks will work. The spirit of these talks recalls the old joke about the Soviet Union: “We pretend to work and they pretend to pay us.” Under this emerging deal, Greece assents to a range of new fiscal cuts, including additional “contingency measures” to be automatically activated if necessary, with the aim of achieving and sustaining a primary budget surplus of 3.5 percent of gross domestic product. And the euro zone says: That will do fine.


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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.