Whether Greece will make it through the Bermuda Triangle (evaluation, debt restructuring and bank recapitalization) will depend not only on what happens in Parliament and the fulfillment of Greece’s commitments. There is, as there always has been, the elephant in the room, which is the International Monetary Fund. Much depends on what it decides to do. The IMF has, in effect, frozen the Greek program. Senior Fund officials make clear that “the current program was agreed between Athens and the Europeans, not by us.” Practically, this means that the IMF can ask for further cuts to pensions or even more fundamental reforms.
Some – with their heads in the clouds, in my opinion – believe that the Europeans will buy Greece’s debt to the IMF and so get it out of the way. In Berlin, however, IMF participation in the Greek program is seen as an inviolable condition for German funding to continue. Chancellor Angel Merkel has been hurt politically by the refugee crisis. Opponents of the Greek program are the same ones who criticize her for her handling of the refugee issue. There is a clear danger that she may try to satisfy them on one front. Without the IMF’s participation it is difficult to see German funding continuing and any restructuring of Greece’s debt.
This brings us to the next major issue. What the IMF is asking with respect to Greece’s debt is difficult for the Northern Europeans to swallow. The Fund’s proposals on debt relief are considered excessive and it is certain they will be rejected. But the same applies to its demands for the Greek program, which would not pass through any parliament.
The government – and the country with it – is in danger of being crushed between the Europeans and the IMF, which is exactly what happened to Antonis Samaras’s administration. People in the know do not rule out the possibility that the Fund’s leadership wants to disengage from the Greek program because it does not believe things will work out and wants to prevent further damage to the IMF’s standing.
If this is the case, it is possible that the Americans could push for the Fund to remain on board. But events so far have indicated that Washington has never been prepared to put its foot down within the IMF to support any Greek government.
A European official who has good knowledge of the Greek issue suggested the other day that he is hopeful everything will go well between Greece and the Europeans but that he could only be certain once the IMF’s position becomes clear.