HUDSON: The IMF says it will not reduce Greece’s debt by a single penny. It will keep the debt in place. The problem is the way that the European central banks keep their balance sheets, if it breaks down Greece’s debt owed to the IMF, then the countries Germany, France and other countries whose banks are bailed out will have to take a loss and they refuse to lose a single penny. So the IMF has not made a creative proposal. It has repeated what it said a year ago without changing a single word. It says okay, we’re going to keep every penny of debt in place but we’re going to give you a fudging number. We’’e only going to charge you 1.5% interest and you won’t have to pay the debt for 25 years. So you don’t get a debt markdown, but you won’t have to pay interests for 25 years and we’ll charge you only a little bit of interest.
There’s only one kicker. You’re going to have to cancel your pensions, write them down, impose austerity, privatize your government, and you’re going to have to shrink your economy so that it will shrink by about 1, 2, 3% a year so that the 1.5% interest that we’re charging as little as it is, is going to absorb all the income growth you have. Every penny of growth of have from the next 25 years ,you’ll have to end up paying the German banks.
Now we know you can’t do it. We know that when you cancel the pensions you’re going to shrink. We know your labor’s on strike. We know they’re going to emigrate.
But there’s a way out. You can sell your ports, your land, your public utilities, your railroads, your airports, anything you have you can sell to the Germans and at the end of this time you won’t have a single thing and all we ask is that all you Greeks get out of our country, now that we own you.
That’s what the IMF is saying. It’s not creative; it’s absolutely brutal. That’s why the Greeks are out on strike.
PERIES: Now why are the lenders then acting the way they are?
HUDSON: Because they’re using finance as the new means of war. There is a war going on in Europe but it’s not a military war anymore. They’re now using finance instead of war and they’re using finance to say, we can grab your country. We can put you out of work. We can control you and we don’t have to kill you, we can just make you immigrate by taking away your pensions and taking all your money. There’s a land grab just as if it were an invasion to grab Greece’s ports, to grab Greece’s railroads, and to grab everything else. This is war.
PERIES: Now the international press has been reporting on Monday’s meeting with the finance ministers as if it was a success and Prime Minister Alexis Tsipras and the finance minister came out of it with smiles, why?
HUDSON: Because they sold out. Because you’re supposed to smile before a camera, that’s the polite thing to do. You’re supposed to smile as if you’ve somehow defended your constituency. Mr. Obama always smiles whenever he does another giveaway to Wall Street. But the smile does not reflect anything that’s good for the great people and the great people obviously know this as you can see by their political reaction.
PERIES: And these attack reforms and pension reforms that now they have to swallow, the people of Greece. What does it really mean for the people?
HUDSON: It means, the opposite of what reforms used to mean. For the last 100 years the whole reform movement meant you give more authority to government. You give more emphasis on economic growth. Reform used to mean making the economy fair. But today we’re in a Orwellian doublethink world where we reform means wiping out the reforms that Greece did after WW II. Wiping out the pension reforms, wiping out the tax reforms, and wiping out the tax reforms apparently. It’s a rollback to what you could call neofeudalism. It’s the opposite of the reform movement. So the newspapers use the word reform but it’s exactly the opposite.
PERIES: Alright then the left wing and the Syriza party. What are they saying in light of what we just heard?
HUDSON: Well they’re appalled and as you know Yanis Varoufakis, whom you’ve had on your show resigned rather than become the undertaker imposing austerity on Greece. They’re simply appalled and think nothing could be worse and that they realized there is a war going on and they’d hoped that they’d be supported by other left wing movements and France and Spain and Portugal. But there’s a bitter class war of debtors against creditors or creditors against debtors going on in Europe and all they can do right now is expose the hypocrisy of the IMF. If you’re talking about Greece, let’s juxtapose the IMF supporting a really insolvent economy of kleptocrats in the Ukraine.
The IMF is preparing to bail out Ukraine, to say you don’t have to pay your debts that you owe to Russia or any governments that the U.S. doesn’t like. You have to sell off your land to George Soros and the people whom the U.S. government does like. Look at the duel standard that the IMF is imposing on Greece compared to what it’s doing for the Ukrainian government. You see that the IMF has become a tool of the New Cold War and the Syriza people and the Greeks can do is point out how unfair this is and to try to let the world know that what is happening is a movement way to the right wing of the political spectrum and that finance is war.
PERIES: Finally, Michael, what choice does the Greek government have? What can they do?
HUDSON: Mr. Tsipras says they have no choice. He says the choice is only to surrender and in fact the argument now is not between Greece and the IMF. Not between Greece and Germany or Europe. The arguments that keep going on are solely between the IMF and Germany as to whether the IMF is going to break its traditional rules and make a loan in violation of all of its principles. Under its articles of agreement, the IMF is not allowed to make a loan to a government that cannot afford to repay the loan. All of the staff of the IMF have unanimously found that Greece cannot pay the loan because the terms of IMF loans, the conditionalities, shrink the economy and make it impossible to pay.
So the IMF says that we’re going to break the rules of that and we’re going to lend, essentially because the U.S. tells us to do that and Greece is going to have to pay so we can demonstrate that if Spain tries to stand up and pay its pensions to people, if France pays its labor, if Italy pays its labor, we’re going to smash their economies, we’re going to smash their labor unions, and we’re going to smash their labor just as we do to Greece. Greece is a demonstration very much like when the Nazis bombed Spain, in the Picasso drew the great drawing for. This is the IMF’s version of the Nazi bombing of Spain to say, this is what’s going to happen to labor throughout Europe if you don’t surrender.
When British forces landed in Greece in October 1944, they found the country under the effective control of ELAS-EAM, the leftist partisan group formed by the Greek Communist Party in 1941 after the Italian and German invasion. ELAS-EAM welcomed the British forces, but the British refused any accommodation with them and installed a government that included royalists and Nazi collaborators. When ELAS-EAM held a huge demonstration in Athens,police opened fire and killed 28 people. The British recruited members of the Nazi-trained Security Battalions to hunt down and arrest ELAS members, who once again took up arms as a resistance movement. In 1947, with a civil war raging, the bankrupt British asked the U.S. to take over their role in occupied Greece. The U.S. role in supporting an incompetent fascist government in Greece was enshrined in the “Truman Doctrine,” seen by many historians as the beginning of the Cold War. ELAS-EAM fighters laid down their arms in 1949 after Yugoslavia withdrew its support, and 100,000 were either executed, exiled or jailed. The liberal Prime Minister Georgios Papandreou was overthrown in a CIA-backed coup in 1967, leading to seven more years of military rule. His son Andreas was elected as Greece’s first “socialist” president in 1981, but many ELAS-EAM members jailed in the 1940s were never freed and died in prison.
Today, 2nd April 2016, WikiLeaks publishes the records of a 19 March 2016 teleconference between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece. The IMF anticipates a possible Greek default co-inciding with the United Kingdom’s referendum on whether it should leave the European Union (‘Brexit’).
“This is going to be a disaster” remarks Velkouleskou in the meeting.
According to the internal discussion, the IMF is planning to tell Germany that it will abandon the Troika (composed of the IMF, European Commission and the European Central Bank) if the IMF and the Commission fail to reach an agreement on Greek debt relief.
Thomsen: “Look you, Mrs. Merkel, you face a question: you have to think about what is more costly, to go ahead without the IMF–would the Bundestag say ‘The IMF is not on board?’, or [to] pick the debt relief that we think that Greece needs in order to keep us on board?”
Remaining in the Troika seems an increasingly hard sell internally for the IMF, because non-European IMF creditor countries view the IMF’s position on Greece as a violation of its policies elsewhere of not making loans to countries with unsustainable debts.
In August the IMF announced it would not participate in last year’s €86 billion Greek bailout, which was covered by EU member states. IMF Chief Christine Lagarde stated at the time that the IMF’s future participation was contingent on Greece receiving “significant debt relief” from creditors. Lagarde announced that a team would be sent to Greece, headed by Velkouleskou.
Thomsen said internally that the threat of an imminent financial catstrophe is needed to force the other players into a “decision point”. For Germany, on debt relief, and In the case of Greece, to accept the IMF’s austerity “measures,” — including raising taxes and cutting Greek pensions and working conditions. However the UK “Brexit” referendum in late June will paralyse European decision making at the critical moment.
“I am not going accept a package of small measures. I am not…” said Thomsen. “What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when [the Greeks] were about to run out of money seriously and to default. […] And possibly this is what is going to happen again. In that case, it drags on until July, and clearly the Europeans are not going to have any discussions for a month before the Brexits…”
Last year Greek Finance Minister Tsakalotos accused the IMF of imposing “draconian measures,” including on pension reform. While Velkouleskou concedes in the meeting that “What is interesting though is that [Greece] did give in… they did give a little bit on both the income tax reform and on the…. both on the tax credit and the supplementary pensions.”
But Thomsen’s view is that the Greeks “are not even getting close [to coming] around to accept[ing] our views.” Velkouleskou argues that “if [the Greek government] get pressured enough, they would… But they don’t have any incentive and they know that the Commission is willing to compromise, so that is the problem.”
Velkouleskou: “We went into this negotiation with the wrong strategy, because we negotiated with the Commission a minimal position and we cannot go further [whereas] the Commission is just starting from this one and is willing to go much further. So, that is the problem. We didn’t negotiate with the Commission and then put to the Greeks something much worse, we put to the Greeks the minimum that we were willing to consider and now the Greeks are saying [that] we are not negotiating.”
While the Commission insists on a Primary Government Budget Surplus (total tax minus all government expenditure excluding debt repayments) of 3.5%; the IMF thinks that this target should be set at 1.5% of GDP. As Thomsen puts it, “if [Greece] come around to give us 2.5% [of GDP in tax hikes and pension-wage-benefits cuts]… we should be fully behind them.” — meaning that the IMF would, in exchange for this fresh austerity package, support the reduction of the Primary Surplus Target imposed upon them from the 3.5% that the European Commission insists on to 1.5%.
These targets are described as “very crucial” to the IMF. The IMF officials ask Thomsen “to reinforce the message about the agreement on the 2.5%, because that is not permeating and it is not sinking very well with the Commission.”
At one point, Velkouleskou refers to an unusual solution: to split the problem into two programs with two different targets: “The question is whether [the Europeans] could accept the medium term targets of the Commission, for the purposes of the program, and our targets for the purposes of debt relief.” Thomsen further explains that “They essentially need to agree to make our targets the baseline and then have something in that they hope that will overperform. But if they don’t, they will still disburse.”
The EWG [Euro Working Group] needs to “take a stand on whether they believe our projections or the Commission’s projections.” The IMF’s growth projections are the exact opposite of the Commission’s. The Commission projects a GDP growth of 0.5%, and the IMF a GDP decline of 0.5% (even if Greece accepts all the measures imposed by the IMF).