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Legarde’s IMF Jenga Gambit

Ayanna Nahmias, Editor-in-Chief
Last Modified: 00:49 AM EDT, 22 February 2012

In the latest Greek Tragedy, aka the Greek deal, the Troika seems determined to ignore the adage to “not pouring good money after bad.” Greece, Ireland and Portugal are the first three countries in the euro zone to agree to ‘bailout’ plans with the so-called Troika consisting of the European commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) which place them under the direct tutelage of their creditors.  Although exact figures haven’t been publicly disclosed, it is believed that after this second bailout Greece will owe a total of €50 billion to the IMF, and according to German Finance Minister Wolfgang Schaeuble bailout No. 2 for Greece will be roughly €23 billion.  The IMF, ECB and European Commission have concluded that Greek’s debt could hit 160% of GDP by 2020.  Even with recently implemented austerity measures which many claim are not substantive enough, Christine Legarde, the IMF’s managing director, seems poised to infuse additional capital into the Greece’s foundering economy. On Tuesday, Legarde issued the following statement, “The combination of ambitious and broad policy efforts by Greece, and substantial and long-term financial contributions by the official and private sectors, will create the space needed to secure improvements in debt sustainability and competitiveness.” The obfuscated motivation behind the IMF’s desire to hurriedly conclude months of bailout negotiations despite Greece’s reticence and its likely inability to repay anything close to 100 cents on the drachma has some questioning the deal. According to financial news sources, this infusion has less to do with Greece and more to do with the rescue of the rest of Europe in an effort to prevent massive defaults and/or an exodus from the euro. Despite deep criticism, Legarde is faced with the same dilemma Obama wrestled with early in his presidency – capital infusion via bailouts or risk the total collapse of the economic system. Legarde, as the IMF managing director is gambling that this risk will ensure the preservation of a 17-nation euro zone can be preserved. Though many would argue that this is not central to the core mission of the IMF, the global economies are so interdependent that like the game of Jenga, without careful position it could all come tumbling down. <!--YouTube Error: bad URL entered--> FRANCE, Paris – In the latest Greek Tragedy, aka the ‘Greek Deal,’ the Troika seems determined to ignore the adage of “not pouring good money after bad.”

Greece, Ireland and Portugal are the first three countries in the euro zone to agree to ‘bailout’ plans with the so-called Troika consisting of the European commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) which place them under the direct tutelage of their creditors.

Although exact figures haven’t been publicly disclosed, it is believed that after this second bailout Greece will owe a total of €50 billion to the IMF, and according to German Finance Minister Wolfgang Schaeuble, bailout No. 2 for Greece will be roughly €23 billion.

The IMF, ECB and European Commission have concluded that Greece’s debt could hit 160% of GDP by 2020.  Even with recently implemented austerity measures which many claim are not substantive enough, Christine Legarde, the IMF’s managing director, seems poised to infuse additional capital into Greece’s foundering economy.

On Tuesday, Legarde issued the following statement, “The combination of ambitious and broad policy efforts by Greece, and substantial and long-term financial contributions by the official and private sectors, will create the space needed to secure improvements in debt sustainability and competitiveness.”

The obfuscated motivation behind the IMF’s desire to hurriedly conclude months of bailout negotiations despite Greece’s reticence and its likely inability to repay anything close to 100 cents on the drachma, has some questioning the deal.

According to financial news sources, this infusion has less to do with Greece and more to do with the rescue of the rest of Europe in an effort to prevent massive defaults and/or an exodus from the euro. Despite deep criticism, Legarde is faced with the same dilemma President Barak Obama wrestled with early in his presidency – capital infusion via bailouts or risk the total collapse of the economic system.

Legarde, as the IMF managing director is gambling that these measures will ensure the preservation of a 17-nation euro zone. Though many would argue that this is not central to the IMF’s core mission, the global economies are so interdependent that like the game of Jenga, without careful positioning and risky calculations, it could all come tumbling down.

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About Ayanna Nahmias

Ayanna Nahmias was interviewed on Radio Netherlands Worldwide program titled 'The State We’re In,' about her life in Africa and her determination to transcend her past. She started the Nahmias Cipher Report to provide information to readers about life in emerging economies, and to provide alternative insight into the challenges faced by women and children living in these countries. The blog features stories from around the world to inspire other people to persevere and triumph in the face of great adversity. She blogs about current events in emerging economies, international politics, human rights abuses, women’s rights and child advocacy.

View all posts by Ayanna Nahmias

2 Comments on “Legarde’s IMF Jenga Gambit”

  1. juwannadoright Says:

    There is a fundamental principle of business (whether of individuals or of sovereign nations) that you can’t get out of debt by borrowing more money to get you out of debt. It’s Austrian Economics 101.

    Reply

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  1. Neoliberalism is an ideology and a compulsion « All Tied Up and Nowhere to Go - 23/02/2012

    [...] Christine Legarde’s IMF Jenga Gambit (ayannanahmias.com) Share this:ShareDiggFacebookRedditStumbleUponTwitterEmailPrintLike this:LikeBe the first to like this post. This entry was posted in Commentary and tagged Dean Baker, Economic Predation, Eurocrisis, European Central Bank, European Union, Greece, Imperialism, International Monetary Fund, Mike Whitney, Neoliberalism, Politics of Greece. [...]

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