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Thread: IMF Team Leaves Brussels After Making No Progress on Greek Deal

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    IMF Team Leaves Brussels After Making No Progress on Greek Deal

    From Bloomberg.com:

    The IMF said that its team negotiating with Greece has left Brussels after failing to make progress on a debt deal that would help the country to avoid default.

    “The ball is very much in Greece’s court,” International Monetary Fund spokesman Gerry Rice told reporters at a media briefing in Washington on Thursday. “There are major differences between us in most key areas. There has been no progress in narrowing these differences recently,” he said.
    http://www.bloomberg.com/news/articl...most-key-areas

    IMO, the intransigence of the current Greek government is astounding, especially when one considers the magnitude of support Greece has been receiving from the European Union, European Central Bank, and International Monetary Fund. The enormous ongoing support Greece has been receiving was noted by Standard & Poor's in its downgrade of Greece's credit rating. In part, the S&P press release explained, "The European Central Bank (ECB) is currently providing financing to Greece’s banks and economy at a level exceeding 60% of GDP."

    The full story about the credit rating revision can be found at: S&P DOWNGRADES GREECE, WARNS IT'LL LIKELY DEFAULT WITHIN 12 MONTHS - Business Insider

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    Quote Originally Posted by donsutherland1 View Post
    From Bloomberg.com:



    IMF Team Leaves Brussels After Making No Progress on Greek Deal - Bloomberg Business

    IMO, the intransigence of the current Greek government is astounding, especially when one considers the magnitude of support Greece has been receiving from the European Union, European Central Bank, and International Monetary Fund. The enormous ongoing support Greece has been receiving was noted by Standard & Poor's in its downgrade of Greece's credit rating. In part, the S&P press release explained, "The European Central Bank (ECB) is currently providing financing to Greece’s banks and economy at a level exceeding 60% of GDP."

    The full story about the credit rating revision can be found at: S&P DOWNGRADES GREECE, WARNS IT'LL LIKELY DEFAULT WITHIN 12 MONTHS - Business Insider
    A liberal entitlement state comes face to face with reality.
    The Gruber-crat is strong in this one!

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    With respect to the issue of pensions, here's what IMF Spokesman Gerry Rice said earlier today:

    Pensions and wages account for 80 percent of Greece's total primary spending. So it's not possible for Greece to achieve its medium term fiscal targets without reforms and especially of pensions.

    So I think it's been acknowledged on all sides, that the Greek pension scheme, system is unsustainable. The Greek pension funds receive transfers from the budget of about 10 percent of GDP annually. Now, this compares to the average in the rest of the Euro zone of two-and-a-half percent of GDP. The standard pension in Greece is almost at the same level as in Germany and people, again on the average, retire almost six years earlier in Greece than in Germany. And GDP per capita increase, of course, is less than half that of the German level.

    But I want to say one more thing on pensions because there's been some misreporting and misunderstanding on the issue of pensions and particularly in relation to what the IMF has been asking for.

    Now, I've laid out some of the basic numbers but I want to emphasize to you that social fairness and social balance is something that the IMF has been emphasizing in the program from the very beginning. And on the issue of pensions, what I want to say is that for social reasons, basic pensions that are targeted to the most vulnerable groups are being protected. And with the planned rollout of the national safety net, that will further ensure that protection.

    So again, I think there's been a bit of misperception, that we are looking to protect the most vulnerable, the lowest income pensioners even as we advocate reform of the pensions.


    The complete transcript can be found at: Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal


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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    I don't believe there is a high-confidence understanding of how a disorderly Greek default would play out. Some insight from Russia and Argentina in the recent past can be useful. There will almost certainly be, at a minimum, spillovers and possible contagion. Developing countries, particularly those with debt-related risks of their own, could be impacted indirectly as markets and capital seek safety. Such parallel market movements occurred to an extent during past debt crises.

    The ECB would probably scale up its equivalent of QE to insulate European banks. The Fed would probably work in concert with other major central banks creating dollar swaps to assure that there is no severe shortage of dollars. Some coordinated interest rate moves might also take place. Renewed and scaled-up deposit guarantees that extend beyond the banking system could be provided.

    Would those efforts be sufficient to mitigate the possible spillovers or contagion? Would they mitigate the shock that could create strong macroeconomic headwinds in at least parts of Europe and perhaps beyond? Could any macroeconomic contraction be limited to Greece or southern Europe? I don't believe anyone has a strong understanding, and there would undoubtedly be some surprises (especially if confidence in other developing countries, even those not largely exposed to Greece begins to evaporate). Greece would almost certainly pass through a hellish renewed economic contraction, especially if its banking system collapses. Moreover, the impact probably would not rival that following the collapse of the U.S. housing bubble and ensuing financial crisis, as the amount of debt (and related financial instruments) involved is magnitudes of order smaller than U.S. mortgage debt and related instruments. Nevertheless, one can't rule out a fairly nasty and fairly large-scale shock.

    Hopefully, there won't be a real world "test" of a disorderly Greek default. A managed default might become necessary, but the IMF has not yet developed the kind of rules that could guide debt reductions and provide a clear and managed sovereign debt restructuring mechanism.

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    Greetings, humbolt.

    Very interesting recap of the debt problem in Greece. Little Greece, with its nine million people, is certainly a problem if they default on their debt, but by themselves they will not bring down the world economy. They are only a small part of a much larger unraveling that's taking place globally among the banks of the world, IMO. It appears that the banks are afraid that Greece will start a trend and other larger countries will default and leave the EU. Greece doesn't have the money to repay their debt, so what are they supposed to do? It seems ridiculous for them to want to borrow more money to help pay for what they already owe, but that's what they appear to be asking for. I'm glad I don't have to solve this problem!

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    From The Telegraph:

    The Greek interior ministry has ordered governors and mayors to transfer all cash reserves to the central bank as bankruptcy closes in.
    EU issues final warning to Greece as last-ditch talks achieve nothing - Telegraph

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    Quote Originally Posted by donsutherland1 View Post
    I don't believe there is a high-confidence understanding of how a disorderly Greek default would play out. Some insight from Russia and Argentina in the recent past can be useful. There will almost certainly be, at a minimum, spillovers and possible contagion. Developing countries, particularly those with debt-related risks of their own, could be impacted indirectly as markets and capital seek safety. Such parallel market movements occurred to an extent during past debt crises.

    The ECB would probably scale up its equivalent of QE to insulate European banks. The Fed would probably work in concert with other major central banks creating dollar swaps to assure that there is no severe shortage of dollars. Some coordinated interest rate moves might also take place. Renewed and scaled-up deposit guarantees that extend beyond the banking system could be provided.

    Would those efforts be sufficient to mitigate the possible spillovers or contagion? Would they mitigate the shock that could create strong macroeconomic headwinds in at least parts of Europe and perhaps beyond? Could any macroeconomic contraction be limited to Greece or southern Europe? I don't believe anyone has a strong understanding, and there would undoubtedly be some surprises (especially if confidence in other developing countries, even those not largely exposed to Greece begins to evaporate). Greece would almost certainly pass through a hellish renewed economic contraction, especially if its banking system collapses. Moreover, the impact probably would not rival that following the collapse of the U.S. housing bubble and ensuing financial crisis, as the amount of debt (and related financial instruments) involved is magnitudes of order smaller than U.S. mortgage debt and related instruments. Nevertheless, one can't rule out a fairly nasty and fairly large-scale shock.

    Hopefully, there won't be a real world "test" of a disorderly Greek default. A managed default might become necessary, but the IMF has not yet developed the kind of rules that could guide debt reductions and provide a clear and managed sovereign debt restructuring mechanism.
    Hopefully the default will be orderly, as you say. It appears to be unavoidable in the face of Greek resistance. Financial markets will need to move in concert, and I am doubtful that some won't look to exploit the weakness exposed by a default eventually in those countries most directly affected. That is, I think the real test may come somewhat further down the road for some.

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    Quote Originally Posted by polgara View Post
    Greetings, humbolt.

    Very interesting recap of the debt problem in Greece. Little Greece, with its nine million people, is certainly a problem if they default on their debt, but by themselves they will not bring down the world economy. They are only a small part of a much larger unraveling that's taking place globally among the banks of the world, IMO. It appears that the banks are afraid that Greece will start a trend and other larger countries will default and leave the EU. Greece doesn't have the money to repay their debt, so what are they supposed to do? It seems ridiculous for them to want to borrow more money to help pay for what they already owe, but that's what they appear to be asking for. I'm glad I don't have to solve this problem!
    Me too. It's not like we could walk away from the table and dust our hands off and say we're finished. That's not an option. Some countries will suffer directly with a Greek default, not to mention the grief awaiting Greece. The question is largely how to stop that snowball at the top of the hill before it gets too big and has too much momentum to be handled at all.

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    Re: IMF Team Leaves Brussels After Making No Progress on Greek Deal

    Tsipras, true to form, should seek compensation from Western nations for copyright infringement on democracy to supplement those coffers.

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