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Wikileaks Produces Unity in Europe--Against the IMF

Walter Russell Mead

Sometimes taped conversations reveal skullduggery. More rarely, they provide a glimpse of honest people trying to do a difficult job. That’s what has happened with the leaked transcript of a call among IMF officials discussing the problems with the current Greek bailout. The Wall Street Journal reports:

A transcript of the March 19 phone call, involving IMF officials in Washington and Athens, was published by the Wikileaks website on Saturday and shows how IMF officials are struggling to persuade Germany and other eurozone countries to give Greece the debt relief and easier fiscal targets that the IMF thinks are needed.

In the call, the head of the IMF’s European department, Poul Thomsen, discusses with his colleagues how the Washington-based fund wants German Chancellor Angela Merkel to make a choice by this summer: ease Greece’s debt burden or lose the IMF’s participation in its bailout.

“Look, you Mrs. Merkel you face a question, you have to think about what is more costly: to go ahead without the IMF…or to pick the debt relief that we think that Greece needs in order to keep us on board,” Mr. Thomsen tells his colleagues, according to the Wikileaks transcript.[..]

Germany isn’t keen on debt relief, which would mean taking a hit on its loans to Greece. But Berlin has made clear to Athens—which would like to get rid of the IMF—that the fund has to stay involved, for the credibility of the program.

If the Germans are embarrassed by this leak, the Greeks are furious:

But Greece’s government seized on the leaked conversation to support its claim that the IMF is the main obstacle to completing the current review of the bailout program and securing fresh rescue loans, which Greece needs to repay large debts falling due in July.

Prime Minister Alexis Tsipras sent a letter to IMF Managing Director Christine Lagarde on Saturday, demanding to know whether the IMF officials’ views expressed on the leaked phone call were the fund’s official position, according to Greek government officials.

To put it bluntly, the Europeans want to do with the Greek problem what the EU has done with most of the other serious problems now crippling it: punt. The European authorities, for whom political convenience trumps all else, want a game of “let’s pretend.” The Greeks don’t want more painful austerity measures, and the Germans want everybody to join their pretense that Greece will ever pay its European debts to the last euro. Both positions are absurd: Greece cannot pay its current debts, and nobody wants to bankroll the country.

The poor IMF, on the other hand, has legal obligations to its shareholders, and its own policies that force it to think about actual math.

This means that Germany and Greece can unite on one thing: dislike of the IMF. The Greeks want it to go away, because a nice European game of “let’s pretend” offers a way for the weakened Tsipras government to keep disguising the catastrophe that its policies have brought onto the Greek people. Also, the Greeks now believe that as long as the migration crisis drags on, their leverage is high. They can blackmail Germany and the north with the threat of screwing up the implementation of the migrant plan, and that threat can help them extort softer terms. Germany wants to keep playing because Angela Merkel has suffered enough damage over the refugee catastrophe and she and her team don’t want to tell voters that, oh, by the way, there will be another bonfire of German cash as its Greek IOUs are written down by billions. And they don’t want to do anything that would provoke the desperate Greeks to play the migrant card.

Politics are real, and international economic crises like the euro crisis must inevitably involve political as well as economic solutions and adjustments. The IMF technocrats are in their own way living in a dream world: the German write-downs and Greek honesty they seek are not possible, and the IMF’s approach to the crisis offers no better chance of a solution than either the Greeks or the Germans bring to the table. But pressuring both sides, and especially Germany, to think harder about the need for an actual as opposed to a Potemkin solution to the Greek fiasco is, under the circumstances, useful pressure.

Missing in action here, one sadly notes, is any sense that the U.S. can play a positive role. The migration and euro crises that together are damaging the world’s most successful experiment in multinational democratic governance threaten vital U.S. interests. Both the White House and the U.S. media don’t seem to care.

Sad!

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