Greece, cont’d

New York Times

Yanis, if you keep talking about the debt, a deal will be impossible, Mr. Dijsselbloem said, according to people who were briefed on the exchange between the two men. …

But Mr. Varoufakis persisted on the issue of Greece’s staggering debt load, ignoring the admonitions of Mr. Dijsselbloem and others.

Then Mr. Varoufakis turned on Christine Lagarde, the French director of the I.M.F.

Five years ago, the fund had given its blessing to the first bailout, doling out loans alongside Europe despite internal misgivings that Greece would be in no position to repay them.

Now the I.M.F. was pushing Greece to sign up to yet another austerity program to access more loans even though the fund had now concluded that their initial misgivings were correct: Greece’s debt was unsustainable.

I have a question for Christine, Mr. Varoufakis said to the packed hall: Can the I.M.F. formally state in this meeting that this proposal we are being asked to sign will make the Greek debt sustainable?

Yanis has a point, Ms. Lagarde responded — the question of the debt needs to be addressed. …

But before she could explain, she was interrupted by Mr. Dijsselbloem.

It’s a take it or leave it offer, Yanis, the Dutch official said, peering at him through rimless spectacles.

Varoufakis obviously has a point. How can Greece be expected to make good on debts that everyone has known are beyond its means? Why bury Greece in further loans when there is no proposal for a way out? Moreover, the troika–IMF, EU CB, and European Commission–have been giving mixed and contradictory messages. The same day that Tsipras proposed a Greek referendum, the IMF was producing an analysis the bolstered Athens’s claims–Greece cannot be expected to meet its obligations without substantial debt relief. According to the Financial Times, the IMF is now agreeing with the call to restructure Greek debt:

Greece needs more than €60bn in new financial help over the next three years and faces decades under a daunting mountain of debt that will make it vulnerable to future crises, the International Monetary Fund has warned.

In a new analysis that lays out Greece’s economic dilemma in stark terms, the IMF on Thursday called for Europe to grant the country “comprehensive” debt relief, arguing for the doubling of the maturities on its debts from 20 to 40 years.

The fund’s assessment is likely to provide succour to the Syriza-led government which is campaigning for a No vote in a referendum on Sunday.

Any success in Greece at resisting austerity measures and pushing back against the EU troika may well spill over into other EU countries–one reason the EU elites probably intend to make an example out of Greece. (FT):

Enrico Letta, Italy’s former prime minister, told Avvenire, a Catholic newspaper, that the Greek crisis could potentially “pave a motorway for the affirmation of populism” in the eurozone’s third-largest economy — particularly if Greece’s travails spread and quash Italy’s tentative recovery.

Vincenzo Scarpetta, an analyst at the Open Europe think-tank, agreed. “Italy is possibly the eurozone country where political contagion would be the most significant,” he said. “If Greece leaves the eurozone, then eurozone membership is not irreversible,” he warned.

Mr Grillo’s party is already Italy’s second strongest, representing nearly a quarter of voters, according to the latest opinion polls, and is particularly excited by the Greek vote because it, too, has long argued for an Italian referendum on euro membership.

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