Greek Crisis: IMF May Not Take Part in Bailout

I have been citing the need for international solidarity with Greece for a number of years, and this may be needed more than ever as leaked documents from an IMF board meeting on Wednesday showed that some board members, particularly those from Canada, Brazil and Asia, were lobbying the others for the IMF not to take part in the latest €86 billion bailout. This attitude is indicative of the current neo-liberal consensus as these institutions, because they are unelected, are only concerned with capital flows irrespective of whether people are driven to destitution by their policy suggestions.

Now seems like a good time to leave and never come back.
Now seems like a good time to leave and never come back. (IMF)
What would the IMF refusing to join in with the latest bailout mean for Greece and Europe more broadly? In short, utter chaos. It would trigger a series of events that would most probably leave Greece outside the Euro and the continued stoking of nationalism within the European Union. The IMF is essential in taking part in the next bailout as German Chancellor Angela Merkel sold the latest bailout to the German Parliament as being with the IMF; it is unclear whether, without the IMF taking part, the vote for another bailout would pass through the German Parliament thus prompting Greece to act to solve the liquidity crisis of its banks (which would most likely result in the Bank of Greece reissuing the Drachma).
A few days ago Comrade Tsipras won a vote within SYRIZA as to whether the Greek government should pull out of negotiations early and leave the Eurozone in order to stop the continued programme of austerity advocated by the Troika.
If the bailout doesn’t pass the German Parliament, and funds are withheld from Greece, the political ramifications could go one of two ways. Either Tsipras is commended for endeavouring to work with the Troika but they were shown to be too willing to let Greece suffer as a result of austerity policies; or Tsipras’ legitimacy is removed totally along with PASOK and New Democracy before them and the door is left wide open for right-wing extremists, like Golden Dawn, to take power as they are the only remaining political force who haven’t been in power in recent years.
Irrespective of what happens in the political consciousness of the Greek people, Tsipras, having shown himself to be a true democrat in the face of technocratic opposition, will most likely call a fresh round of elections as he will feel that his democratic mandate was to ensure Greece remained in the Euro. Regardless of any observer’s political ideology this scenario is worrisome as leftists like myself will fear the rise of the far-right or another neo-liberal puppet for the Troika to have fun with, whereas capitalists will continue to see market uncertainty that could at any moment trigger another Europe-wide recession.
For a second I thought that was a swastika. Now that I know it isn't, they must be harmless.
For a second I thought that was a swastika. Now that I know it isn’t, they must be harmless. (Channel 4)
Getting away from this doomsday scenario, the more broad question would be what should be done about the spiralling Greek debt which is now projected to hit 200% of GDP in the near future? As has been said by people on the Left since SYRIZA came to power it requires compromise on both sides, but the boldest action must come from the Troika.
In order to prevent the collapse of the Eurozone and the European Union as an entity a pan-European debt cancellation conference needs to be called so that any future bailout funds go to investing in economies rather than injecting capital into French and German banks. Secondly, as some leading French politicians have been saying in recent weeks, there needs to be stronger integration of the Eurozone countries which may also include the harmonisation of Eurozone economies and stricter rules for countries seeking to join the Euro.
From the Greek side there are some reforms that could be implemented that Tsipras has already said he would implement, most notably the the raising VAT to 23% with fewer exemptions, raising corporation tax to 28%, cutting defence spending and some significant pension reforms. If I was feeling especially radical I would have also proposed nationalising the property and assets of the Greek Orthodox Church, and increased the rate of luxury tax from 13% to 20%, but I’m also aware that Greek people, many of whom are religious, and the creditors respectively may have protestations.
Nationalise it for that sweet, sweet, capital.
Nationalise it for that sweet, sweet, capital. (Creative Commons)
If the IMF were to distance itself from the latest Greek bailout they would be condemning Greece to another period of uncertainty without light at the end of the tunnel. The board members that are pushing for the IMF to abandon Greece are illustrating to the Greek people how the Troika are not concerned with the well-being of ordinary people which would only harden attitudes towards the neo-liberal economics that they are pushing. If the IMF board wants to do the best thing for Europe and the reputation of their institution, they would work with the Greek government to resolve this crisis and should listen to Christine Legarde when she called for “significant” debt relief for Greece.
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