The apparent clashes between the International Monetary Fund, the European Commission and Germany, with regard to the Greek private sector involvement (PSI) deal and the level of funding required for the country?s new bailout loan, reveals the different strategies taking shape in the face of the debt and euro crises.
Evidently the so-called troika does not have an unified strategy when it comes to handling the Greek problem: The IMF is adopting its own position as the recession picks up speed following the tougher fiscal discipline; the European Commission has a different take, as it observes its own political influence slipping away along with the disintegrating European Union social map; and Germany, which led the pack in the imposition of tight fiscal rules and is demanding Greece?s punishment and guardianship, has a different opinion as well.
The IMF is aware of the fact that Greece cannot exit the crisis based on a process of domestic devaluation alone. The same goes for Portugal and Ireland, as well as bigger countries like Italy and Spain.
The IMF chief economist Olivier Blanchard seems to be behind a novel, more flexible approach to the European issue. This position is being voiced in public by the organization?s Managing Director Christine Lagarde when she is seen putting pressure on the independent, fortified European Central Bank and an unbending Germany.
The IMF, the World Bank and other international organizations are now openly warning that the persistent focus on fiscal discipline — including in countries which have gone bankrupt or are heavily indebted — threatens to spark a recession not only across the European continent, but the rest of the world as well.
As the first victim of the euro crisis, Greece is being subjected to mutually exclusive and conflicting panaceas concocted by weak leaders and irresponsible technocrats who are feeling intimidated and constantly being defeated by global markets.
Eurobonds, increased liquidity and the possibility of settling debts are all on the way and will eventually be soothing to Europe, but all of this will come later, not now. The question in this case is in what state Greece will be when that day finally comes.