The Guardian reports: The International Monetary Fund has slashed its forecast for UK growth next year after warning that the decision to leave the EU has damaged the British economy’s short-term prospects and “thrown a spanner in the works” of the global recovery.
The IMF, which voiced strong misgivings about a vote for Brexit in the runup to the EU referendum, said it expected the UK economy to grow by 1.3% in 2017, 0.9 points lower than a previous estimate made in its April world economic outlook (WEO).
Financial Times reports: The International Monetary Fund has agreed to give Iraq a three-year $5.4bn bailout to help it manage the economic fallout of its war against Isis and low oil prices that have left a gaping hole in its budget.
The new rescue package, which the IMF said should be accompanied by assistance from other members of the international community, will require the government in Baghdad to implement unpopular cuts in public spending and other reforms at a time when the economy is already reeling.
“Iraq has been hit hard by the conflict with Isis and the precipitous fall in oil prices,” said Christian Josz, IMF mission chief for Iraq.
He added that the conflict with Isis had left more than 4m Iraqis internally displaced and was straining resources, while the steep fall in oil prices was “causing a large external shock to the balance of payments and budget revenue, which depend predominantly on oil export receipts”.
UN diplomats in Baghdad and officials in Washington say Iraq’s foreign backers are determined to get support to Iraq at a time when both the central government and the semi-autonomous Kurdistan administration in the north — both critical in the fight against Isis — look on the verge of economic collapse. With no money for repairs, several cities recaptured from Isis still lie in ruins.
However, Iraqi politicians privately said last week that the government may not be able to meet the terms of the IMF deal — which include fighting corruption and money laundering, as well as cutting subsidies and raising taxes. [Continue reading…]
The Guardian reports: A British vote to leave the EU risks causing severe economic and political damage to Europe that will spill over into an already febrile world economy, the International Monetary Fund has warned.
Cutting its forecasts for global growth and for the UK and other advanced economies, the IMF listed a potential Brexit vote in June’s EU referendum as a key risk in its latest World Economic Outlook (WEO).
Maurice Obstfeld, the IMF’s chief economist, said a decision to quit the EU was a “very real” possibility and would affect economic growth even if an exit was managed smoothly.
“In the United Kingdom, the planned June referendum on European Union membership has already created uncertainty for investors; a ‘Brexit’ could do severe regional and global damage by disrupting established trading relationships,” he said
The Washington-based Fund said economic growth was also threatened by a host of other factors, including “the tragedy of large-scale refugee inflows” to Europe, a potential reappearance of financial market turmoil, China’s difficult economic rebalancing and growing income inequality. [Continue reading…]
Yanis Varoufakis writes: The feud between the International Monetary Fund (IMF) and the European side of Greece’s troika of creditors is old news. However, Wikileaks’ publication of a dialogue between key IMF players suggests that we are approaching something of a hazardous endgame.
Ever since the first Greek ‘bailout’ program was signed, in May 2010, the IMF has been violating its own “primary directive”: the obligation not to fund insolvent governments. As a result, the IMF’s leadership has been facing a revolt from its staff members who demand an exit strategy arguing that, if the EU continues to obstruct the debt relief necessary to restore the solvency of the Greek government, the IMF should leave the Greek program.
Five years on, this IMF-EU impasse continues, causing a one-third collapse of Greek GDP and fuelling hopelessness to a degree that has made real reform harder than ever.
Back in February 2015, when I first met Poul Thomsen (the IMF’s European chief) in a Paris hotel, a fortnight after assuming Greece’s finance ministry, he appeared even keener than I was to press for a debt write off: “At a minimum”, he told me “€54 billion of Greece’s debt left over from the first ‘bailout’ should be written off immediately in exchange for serious reforms.”
This was music to my ears, and made me keen to discuss what he meant by “serious reforms”. It was a discussion that never got formally off the ground as Germany’s finance minister vetoed all discussion on debt relief, debt swaps (which were my compromise proposal), indeed any significant change to the failed program.
What new light does the leaked dialogue between Thomsen and Delia Velculescu (the IMF’s Greek mission chief) throw on this saga? [Continue reading…]
The New York Times reports: Greece called on the International Monetary Fund on Saturday to explain whether it was seeking to usher Athens toward bankruptcy ahead of a pivotal referendum in June on Britain’s membership in Europe. Greece’s comments came after I.M.F. officials raised questions in a private discussion published by WikiLeaks about what it would take to get Greece’s creditors to agree to debt relief.
The transcript, which captures what WikiLeaks said was a teleconference conversation in March between Poul Thomsen, the head of the I.M.F.’s European operations, and the I.M.F.’s Greek bailout monitor, underscored a widening rift between the I.M.F. and Greece’s European creditors that could jeopardize Greece’s new 86 billion euro bailout. It also exposed the fraught behind-the-scenes political machinations that have led to a deadlock on how to deal with a country still regarded as Europe’s weakest link.
The I.M.F. declined to comment on the WikiLeaks transcript, but said in a statement that Greece needed to be put “on a path of sustainable growth” supported by reforms and further debt relief. The document touched off a fresh political frenzy inside Prime Minister Alexis Tsipras’s government, which accused the I.M.F. of trying to “politically destabilize Europe.” [Continue reading…]
Bloomberg reports: Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices.
The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said.
Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain. [Continue reading…]
Josh Barro writes: It reads like a dry, 1,184-word memorandum about fiscal projections. But the International Monetary Fund’s memo on Greek debt sustainability, explaining why the I.M.F. cannot participate in a new bailout program unless other European countries agree to huge debt relief for Greece, has provided the “Emperor Has No Clothes” moment of the Greek crisis, one that may finally force eurozone members to either move closer to fiscal union or break up.
The I.M.F. memo amounts to an admission that the eurozone cannot work in its current form. It lays out three options for achieving Greek debt sustainability, all of which are tantamount to a fiscal union, an arrangement through which wealthier countries would make payments to support the Greek economy. Not coincidentally, this is the solution many economists have been telling European officials is the only way to save the euro — and which northern European countries have been resisting because it is so costly.
The three options laid out by the I.M.F. would have different operations, but they share an important feature: They involve other European countries giving Greece money without expecting to get it back. These transfers would be additional to the approximately 86 billion euros in new loans contemplated in Monday’s deal. [Continue reading…]
George Monbiot writes: Greece may be financially bankrupt, but the troika is politically bankrupt. Those who persecute this nation wield illegitimate, undemocratic powers, powers of the kind now afflicting us all. Consider the International Monetary Fund. The distribution of power here was perfectly stitched up: IMF decisions require an 85% majority, and the US holds 17% of the votes.
The IMF is controlled by the rich, and governs the poor on their behalf. It’s now doing to Greece what it has done to one poor nation after another, from Argentina to Zambia. Its structural adjustment programmes have forced scores of elected governments to dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives.
The same programme is imposed regardless of circumstance: every country the IMF colonises must place the control of inflation ahead of other economic objectives; immediately remove barriers to trade and the flow of capital; liberalise its banking system; reduce government spending on everything bar debt repayments; and privatise assets that can be sold to foreign investors.
Using the threat of its self-fulfilling prophecy (it warns the financial markets that countries that don’t submit to its demands are doomed), it has forced governments to abandon progressive policies. Almost single-handedly, it engineered the 1997 Asian financial crisis: by forcing governments to remove capital controls, it opened currencies to attack by financial speculators. Only countries such as Malaysia and China, which refused to cave in, escaped. [Continue reading…]
Anders Lustgarten writes: In the desert, the smugglers lace their water with petrol so the smuggled won’t gulp it down and cost more. Sometimes the trucks they’re packed into stall crossing the Sahara; they have to jump out to push, and some are left behind when the trucks drive off again. In transit camps in Libya before the perilous venture across the Blue Desert, they play football, fight, and pool their scanty resources so an even poorer friend can pay his way. One man says his tiny wooden boat was flanked by dolphins as they made the journey, three on each side, like guardian angels, and this was what gave him hope.
These are the people we are allowing to die in the Mediterranean. The EU’s de facto policy is to let migrants drown to stop others coming. Last year nearly four thousand bodies were recovered from the Med. Those are just the ones we found. The total number of arrivals in Italy in 2014 went up over 300% from the year before, to more than 170,000. And the EU’s response, driven by the cruellest British government in living memory, was to cut the main rescue operation, Mare Nostrum.
The inevitable result is that 500 people have already died this year. The figure for the equivalent period in 2014 was 15. There are half a million people in Libya waiting to make the crossing. How many more deaths can we stomach?
Migration illustrates one of the signal features of modern life, which is malice by proxy. Like drones and derivatives, migration policy allows the powerful to inflict horrors on the powerless without getting their hands dirty. [Continue reading…]
With another impending international debt deadline, Greece runs the risk of becoming the first OECD country to default on its obligations to the IMF. The country owes €448m – and many are once again raising the “spectre of Grexit” idea, accompanied by damning commentary on Greece’s failure to get successfully through the crisis.
Mainstream accounts of Greece’s economic situation emphasise how the so-called troika (the European Commission, European Central Bank and International Monetary Fund) has been aiding Greece by throwing it a much-needed financial lifeline of billions.
All this bail-out money is supposedly helping to keep the country afloat and prevent the Greek economy from going bankrupt. But in spite of all this aid, the Greek economy keeps sinking and Greeks apparently only seek to satisfy a growing appetite for easy money.
These popular accounts are, however, full of misconceptions over the nature of the financial aid Greece is receiving and serve to damage the prospect of a more balanced understanding of the situation – and effectively stymie chances for a more viable solution. Greece emerges as a country morally indebted to the troika’s help, only against the backdrop of a quite dangerous mythology, consisting of a constellation of falsehoods, dogmatic hypotheses and unwholesome oversimplifications.
But where has all the money gone?
The vast majority of the financial lifeline meant to save Greece has never entered the Greek economy. The record loan of €240 billion was mostly channelled directly for debt-servicing purposes. It was primarily meant to prevent – chiefly French and German – financial institutions from suffering losses, by ensuring that European taxpayers bought an (unpayable) debt. This, all in the name of “Greek aid”.
Moreover, Greece’s primary surpluses since 2013 mean that it needs cash only in order to service the massive debt that the bail-out money has kept in place. The Greek state has sufficient money for its domestic needs but cannot simultaneously afford to repay billions of debt at this point – not without turning a blind eye to its most needy citizens.
Still, the nature of the bail-out is overshadowed by deceptive representations which give the impression that the Greek economy is rescued by being the recipient of billions of euros. It would be truly interesting, indeed, to know how many of Europe’s taxpayers know that more than 90% of the €240 billion borrowed by Greece went directly to financial institutions.
Bloomberg: Prime Minister Alexis Tsipras sought to repair relations with Greece’s creditors ahead of a diplomatic push to win support for his economic program, as euro area officials said they’re looking for concessions from the new government.
Greece will repay its debts to the European Central Bank and the International Monetary Fund and reach a deal “soon” with the euro-area nations that funded most of the country’s financial rescue, Tsipras said in a statement e-mailed to Bloomberg News on Saturday.
“The deliberation with our European partners has just begun,” Tsipras said. “Despite the fact that there are differences in perspective, I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole.”
Paul Mason writes: The fact that a party with a “central committee” even got close to power has nothing to do with a sudden swing to Marxism in the Greek psyche. It is, instead, testimony to three things: the strategic crisis of the eurozone, the determination of the Greek elite to cling to systemic corruption, and a new way of thinking among the young.
Of these, the eurozone’s crisis is easiest to understand – because its consequences can be read so easily in the macroeconomic figures. The IMF predicted Greece would grow as the result of its aid package in 2010. Instead, the economy has shrunk by 25%. Wages are down by the same amount. Youth unemployment stands at 60% – and that is among those who are still in the country.
So the economic collapse – about which all Greeks, both right and leftwing, are bitter – is not just seen as a material collapse. It demonstrated complete myopia among the European policy elite. In all of drama and comedy there is no figure more laughable as a rich man who does not know what he is doing. For the past four years the troika – the European Commission, IMF and European Central Bank – has provided Greeks with just such a spectacle.
As for the Greek oligarchs, their misrule long predates the crisis. [Continue reading…]