Greece: It will be a sorry day for the euro zone when it turns to the International Monetary Fund to help stave off the Greek crisis. That looks likely to be the outcome of a compromise destined to both lighten Greece’s burden and appease Germany’s anger that could emerge from this week’s summit. The same governments that repeatedly said they wouldn’t need the IMF will instead invite it into their mess, just so Angela Merkel can go home and say no German money will be used to bail out those cheating and lazy Greeks.
There was no reason for Greece to turn to the IMF, save for the German leader’s failure to show vision in the face of a populist outcry. The IMF won't be able to contribute much with advice. One of its traditional instruments - devaluation - is precluded. The other, fiscal contraction, is already under way now that Greece has embarked on a credible deficit-reduction plan.
Euro zone countries that run into trouble will now know that they don’t have much to hope from the much-heralded “solidarity” between its members.
At least one positive outcome of the crisis is that it has laid bare the basic flaws of the European currency: the absence of both a credible way to force fiscal discipline on unruly members before things get really out of hand and of a proper crisis-resolution mechanism when they do.
Greece was only asking for help to borrow at less than the punitive 6.2 per cent its bonds currently yield. Depending on the final details of this week’s compromise, it may at least be able to get IMF loans at below-market rates. If Greece borrows from the IMF half the 16 billion euros it needs to roll over in the next two months, it would pay a rate of some 2.7 per cent.
That’s even less than the 3.1 per cent current yield on German bonds. So much for the “moral hazard”-obsessed fetishists, fixated on ensuring Greece is severely punished for its fraudulent statistics and irresponsibility.
