Leaks from the IMF

Secret documents leaked by the Wall Street Journal show that the International Monetary Fund was not so sure about the way Merkel and her supporters went about saving the Euro. Did the German chancellor not only push the wrong strategy, but was she lying about it, too?

Washington is the stage for this show. The self proclaimed rescuers of the Euro are bragging about their success while shaming the US, which is suffering by its government shutdown.

The IMF seems to sing the same song, although it does so purely for show: Merkel’s strategy is discredited quite openly within the administration.

WSJ quotes from IMF internal documents (quoted according to the German website), showing how the organisation did not believe in the approach, right back to the very first Greece bailout.

Merkel was pushing for a bailout coupled to severe austerity measures, while the IMF saw the need for a debt restructuring already back in 2010.

This does not just show the current debate about a haircut in another light. It requires evaluation of a basic assumption: was the motivation for the original bailout actually to help Greece?

Or was it the plan all along to cover the German, French and British private creditors? Was the bailout merely designed to buy sufficient time for them to restructure their holdings?

That is exactly what the IMF’s report suggests.

Some of the IMF dissenters at the meeting and some IMF staff believe the interests of the European powers were placed above those of Greece […]

“The Greek bailout was not a program for Greece, but for the euro zone itself,” one participant at the 2010 meeting says today.

In retrospect, the report said, the “program served as a holding operation” that allowed “private creditors to reduce exposures, leaving taxpayers and the official sector on the hook.”

These are strong accusations. They confirm the central assumption of my book (german, “Wir retten die Falschen”) and a number of posts on this blog: German and French banks are in the center of this story.

Insiders were aware of the ruse right from the beginning, and a considerable part of the IMF – it is said a third of the decision makers – felt grave concerns.

It seems that the “Euro rescuers” could pull it through with a higher voting rank and backing of the US. But the current situation shows that the problem is not solved, but has gotten worse.

But still, the strategists stubbornly insist on a bright future for the single currency.

Der deutsche Original-Text steht hier.