Friday, May 30, 2014

30/5/2014: IMF: We are Failing, but We Soldier On… at Your Expense...

IMF press release from today [my comments in italics]:

"The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Greece’s performance under an economic program supported by an Extended Fund Facility (EFF) arrangement. The completion of this review enables the disbursement of SDR 3.01 billion (about €3.41 billion, or US$4.64 billion), which would bring total disbursements under the arrangement to SDR 10.22 billion (about €11.58 billion, or US$15.75 billion).

In completing the review, the Executive Board approved a waiver of nonobservance of the performance criterion on domestic arrears, given the corrective actions taken. In light of the delays in program implementation, the Board also approved the authorities’ request for rephasing three disbursements evenly over the remaining reviews in 2014. [In other words, Greece failed to deliver on programme commitments on time. IMF response - just shift the goal posts. Behind the scenes, of course, we all know that Greece is routinely failing to deliver on the Programme and that delivering on said Programme is actually not exactly what Greece needs to restore its economy to growth and its society to health. IMF knows the same, but being a committed 'European' the Fund can't openly say the same in full voice. So instead of admitting the failure of the Programme, it pushes off targets and alters time frames.]

...Following the Executive Board discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“The Greek authorities have made significant progress in consolidating the fiscal position and rebalancing the economy. The primary fiscal position is in surplus ahead of schedule, and Greece has gone from having the weakest to the strongest cyclically-adjusted primary fiscal balance in the euro area in just four years. However, several challenges remain to be overcome before stabilization is deemed complete and Greece is back on a sustainable, balanced growth path. [We know what 'surplus' Greece delivered in 2013. IMF knows this too. Still, soldier on… nothing to admit here.]

“Additional fiscal adjustment is necessary to ensure debt sustainability, through durable, high-quality measures, while strengthening the social safety net. It is essential that the authorities continue to improve tax collection, combat evasion, and strengthen expenditure control. Public administration reforms need to be accelerated. The authorities are taking remedial actions to clear domestic arrears and expedite privatization. [Alas, even the IMF has to face the facts. The Fund does so in a Monty Pythonesque way by calling for more adjustments. After successful adjustments imagineered above, more adjustments still needed… It is as IMF is playing a role of doctor who, having sawed off one leg of the patient is now claiming operation success because the other leg has to go too…]

“Despite significant wage adjustment, export performance remains comparatively weak. The redoubling of efforts to liberalize product and service markets is therefore welcome. Further measures are necessary to remove regulatory barriers to competition in key sectors and to reform investment licensing. The authorities are committed to revitalizing labor market reforms and improving the business climate. [No one can accuse the Fund of ever once having exported anything, save research papers and policy proposals. Having no understanding of business, the IMF thinks that if/once Greece cuts prices/costs sufficiently enough and 'liberalises markets' the entire world will start glamouring for Greek-made exports. What markets does Greece need to liberalise to improve export performance? Exports require goods and services that someone in the world wants. Name sectors of Greek economy that can export that are currently not exporting.]

“Addressing the very high level of nonperforming loans remains an important priority. While there is no acute stability risk, it is critical for the economic recovery that banks be adequately capitalized upfront to recognize losses on the basis of realistic assumptions about loan recovery. Efforts are being made to recapitalize the banking system and set aside the buffer of the Hellenic Financial Stability Fund to deal with contingencies that may arise during the program. The private debt resolution framework should also be strengthened expeditiously. [Efforts to recapitalize Greek banks have been ongoing for a good part of 3.5 years now. Does IMF have any idea when these efforts might bear some fruit? Or is this too a fungible time line?]

“Public debt is projected to remain high well into the next decade, despite a targeted high primary surplus. The assurances of Greece’s European partners are welcome that they will consider further measures and assistance, if necessary, to reduce debt to substantially below 110 percent of GDP by 2022, conditional on Greece’s full implementation of the program,” Mr. Shinohara stated. [Key point is this: Greece needs debt restructuring that will have to be concentrated on public lenders. Aka: ECB and European 'partners'. We are in 2014 now - four years into witnessing staunch denial from the ECB and European partners of the need for such measures. Keep shifting the targets, IMF. It is about the only route to saving face in this mess left to the Fund.]

The entire Greek programme analysis by the IMF now firmly resembles a one-handed resignation that a second rate tennis player starts to display at the end of the second set, having lost the first one and going on to 6:0 loss for the second round.

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