LF: IMF stuns Europe with call for massive Greek debt relief

Title: IMF stuns Europe with call for massive Greek debt relief
Source: UK Telegraph
URL Source: http://www.telegraph.co.uk/finance/ ... massive-Greek-debt-relief.html
Published: Jul 14, 2015
Author: Ambrose Evans-Pritchard
Post Date: 2015-07-14 19:18:54 by cranky
Keywords: None
Views: 1600
Comments: 32

The International Monetary Fund has set off a political earthquake in Europe, warning that Greece may need a full moratorium on debt payments for 30 years and perhaps even long-term subsidies to claw its way out of depression.

The creditors were aware of the IMF’s report as early as Sunday, yet choose to sweep it under rug. Extracts were leaked to Reuters on Tuesday, forcing the matter into the open.

^{IMF managing director Christine Lagarde}

The EMU summit statement vaguely mentions “possible longer grace and payment periods”, but only at later date, and only if Greece is deemed to have complied with all the demands. Germany has ruled out a debt “haircut” altogether, claiming that it would violate Article 125 of the Lisbon Treaty.

The IMF said there is no conceivable chance that Greece will be able to tap private capital markets in the foreseeable future, leaving the country entirely dependent on rescue funding.

It claimed that capital controls and the shutdown of the Greek banking system had entirely changed the picture for debt dynamics, an implicit criticism of both the Greek government and the eurozone authorities for letting the political dispute get out of hand.

The decision by the European Central Bank to force the closure of the Greek banks two weeks ago by freezing emergency liquidity assistance (ELA), appears to have cost European taxpayers very large sums of money..

The IMF said the Europeans will either have to offer a “deep upfront haircut” or slash the debt burden by stretching maturities and presumably by lowering interest costs.

“There would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt,” it said.

Debt forgiveness alone would not be enough. There would also have to be “new assistance”, and perhaps “explicit annual transfers to the Greek budget”.

This is the worst nightmare of the northern creditor states. The term "Transfer Union" has been dirty in the German political debate ever since the debt crisis erupted in 2010.

The underlying message of the report is that Greece is in such deep trouble that it cannot withstand further austerity cuts. This is hard to square with the latest demands by EMU creditors for pension cuts, tax rises, and fiscal tighting equal to 2pc of GDP by next year.

Nobel economist Paul Krugman said the cuts are macro-economic "madness" in these circumstances.

Yanis Varoufakis, the former Greek finance minister, told the New Statesman that whenever he tried to discuss the economic rationale for the policies enforced upon Greece, he was met with blank stares. "It is as if you haven’t spoken. You might as well have sung the Swedish national anthem – you’d have got the same reply.”

Unless there is a change of course, Greece's debt ratio will still be 170pc of GDP by the time the current framework expires in 2022. Even this assumes that there is no global downturn, and that everything goes to plan. The figure is up from 142pc two weeks ago.

The IMF’s report raises as many questions as it answers. Almost no economist would accept that two weeks of capital controls could alone raise the debt ratio by 28 percentage points of GDP a full seven years later.

The backdrop to this sudden shift in position is almost certainly political. It follows an intense push for debt relief over recent days by the US Treasury, the dominant voice on the IMF Board in Washington.

The IMF’s report issued in early July was savaged by one bail-out veteran. Ashoka Mody, the former chief of Ireland’s IMF rescue, said the original findings were “fictitious” and failed to recognize the full gravity of the debt-deflation crisis in Greece.

It appears that powerful voices in global capitals and on the IMF board have since demanded that the Fund go back to the drawing board.

Its conclusions validate what Greece’s Syriza government has been saying all along. The debt cannot be repaid. Any formula that fails to recognize this merely stores up an even bigger crisis down the road. `

The Icelandic path might be preferable. The debt would be written off. For Greece it would mean a problematic shift back to the drachma. As it is, the preferred EU path would have Greek assets owned by the EU. The EU big fish eating the little fish is the predictable result of the little fish handing over control of their currency.

I seem to remember Denmark, for old times sake, lending Iceland a couple of billion krones to tide them over. Something about common ancestry or some such thing.

That's just arithmetic. Greece can't repay the loans, at least not under the terms of the loans. But if Greece or any sovereign nation goes bust, the debts are not repaid at all. It would be something like a $350B writeoff for European taxpayers. The banksters unloaded a significant majority of their liability under a previous deal a few years back. Ireland, Italy, and France are not in great shape either.

The whole debt should be voided. All debt in the Christian world should be voided. Jubilee. Start anew.

This i sthe real dangerous idea - not because it loses the financiers money - but it proves were are not living at all anymore in a Christ centered world. This is something the most patriotic of Christians loathe to speculate on.

Especially given that we don't have valid title in the land to begin with. Most of the land was taken by violent force or fraud from the original owners with the title to grant it. Their heirs live and could be revested with it, but for numbers. Also, it would not perforce be justice to take the land whose title is settled by tradition away. There would be cosmic justice in it, and perhaps divine (or perhaps the Indians were expropriated by God because of their own evils).

Still, the fact remains that where there are treaties, and those treaties' terms are unobserved (which is generally the case), we do not even have title to the land we buy and still. It is a matter of force, and that does not establish justice.

Now then, housing is a basic need, and careful medical studies have shown that one of the leading causes of obesity in the poor is insecurity, and the greatest single expense and cause of insecurity in children and women is unstable housing. So, we have a population of people getting fat through stress and depression, and a major cause of economic stress is fear of homelessness (even if unexpressed).

Note well that the same stress and depression over instability and hopelessness drives obesity and alcoholism among the Indians from whom the land was snatched.

Housing, being a right from God (note what he did for Israel), on land he made - our Father knows what we need - should neither be in the hands of banks nor in the hands of landlords. Rather, there should be a government bank that issues interest free loans, payable over a lifetime from a percentage of income above a floor (in other words, the first tranche of taxes), payable from the estate if there is one, and otherwise, forgiven at death. Each adult on coming of age should be able to access this loan for his or her basic housing, with the size of the loan dependent on areas of residency and marital status. The loan amount can increase over time with life changes, but is constantly being paid down as a percentage of income. The objective is to get people into houses they can afford for each level of life, to allow them (as opposed to the banks) to capture the benefits of property value growth, and to provide the most fundamental level of security of all: housing security. Consider the dramatic cut in the cost of college, and in the need for welfare, if each adult owned his own lodging. Consider how that benefits savings. And consider how much more supple the economy would be.

Consider it all, and then realize that it is quite impossible with heathens and pagans to do any such thing. They will steal. They will cheat. The state, our state, cannot do this. A confessional state where people really believed could, but our secular and decaying state cannot.

But WE can. Christians can do this. Consider the money that the well-meaning Monaghan, of Domino's Pizza, spent building a whole new city, Ave Maria, Florida, with its own new college. He did what he thought best. But now imagine that, instead of that, such philanthropy and wealth were devoted to give Christians loans.

6 years was the standard for Israel, under God's law where the land was owned. We're not "under the law", but we're under the IDEA of the law. No usury, stability.

I can go into detail later, but let's consider the "New Model Christian" first, because all begins with each individual. That is where the nexus of thought and action is. That is what is saved. Entities and property rights are words, and words are wind. But men are real, and men endure, as spirits, to the end. It is the building of men, then, that is ultimately important.

Men cannot be rightly built, upon bedrock foundations, when idols like flags and nations, or excessive devotion to any tradition, is central. Of course the Christian tradition is central, but it is important to distinguish between the Christ part of it, and the tradition. The Catholics have a tradition which we say is Infallible of Papal Infallibility on matters of faith and doctrine. Christ was content to deal with very fallible Peter, Paul, James, John and Jude.

The traditions of Papal Supremacy have caused immense, seemingly unbridgeable divisions in Christianity. But Christ told the Apostles not to lord it over each other like pagans. This is not to say, therefore, that Catholicism is the Whore of Babylon. No. It is to say that there are traditions that come directly from Christ, and that have been preserved, and that work. And then there is the other stuff added on that is also tradition, and that sometimes works, and sometimes wreaks havoc. Catholics are not any better than Protestants or anybody else at distinguishing where that line is. There are nevertheless things on which Catholics and Orthodox agree, and since that right there is about 92% world Christianity, that's the place to start. Some Protestantism seems well-meant. Some of it (Phelps' Baptist Church) is evil. Apostolists (Catholics and Orthodox) need not spend precious time dwelling in the fever swamps of Protestant error. It is enough to cooperate with each other on what we agree on to move the world.

Maybe in the course of doing that, we'll move as Churches back towards each other even closer.

But it all starts with the individual. SOSO cannot understand this. Others there cannot. For them, it starts with the Constitutiuon, or the State, or the Bank, or the Economic System, or the ideology of "conservatism". On the secular left it is not different.

No purpose is served by spending time dwelling on the errors of unreachable others. The better path is to focus on what's right. And the place where that begins is with the individual analysis.