The Return of the Troika (2/2)
James K. Gailbraith says, IMF is demanding a substantial reduction of the Greek debt to participate in any new deal and meanwhile German law makers are refusing to approve a new bail-out without the IMF
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome back to part two with James K. Galbraith. James K. Galbraith teaches at LBJ School of Public Affairs at the University of Texas, Austin. Thank you so much for coming back on the Real News Network, James.
JAMES K. GALBRAITH, PROF. OF ECONOMICS, LBJ SCHOOL OF PUBLIC AFFAIRS: Pleasure.
PERIES: James, in part one we were talking about the stipulation, or the position I should say, that the IMF has now taken in relation to the Greek debt, and at this moment as we speak, negotiations are underway between the finance ministers of Greece and the Troika.
So give us a sense of what’s on the table and what’s being discussed first.
GALBRAITH: Well, I think the big issue here is that the IMF is not prepared to go forward with the financing of a new program, putting up further IMF money, unless the European partners are prepared to restructure and re-profile, or haircut the Greek debt to a very substantial extent.
The German partner in particular, the German government which has to pass a program through the Bundestag, has said that it would not be able to do so unless the IMF is participating. So there’s a little dance going on between the two of them, and it’s not clear at this stage how it will come out. So if the IMF does not participate and the German government is serious about not being able to pass it without IMF participation, then there is no program, and the entire exercise would seem to run into very substantial difficulty. On the other hand it is still, I suppose, possible that they will work out some arrangement that will permit the exercise to go forward, in which perhaps you might have a preliminary commitment of one kind or another that would satisfy the German government and a timetable for the actual cementing of IMF participation that would come later.
But these things are all, I think, at this stage quite uncertain. And they are against the backdrop of the fact that nobody seriously believes that the economic program which is being imposed on Greece is going to produce a stable recovery of the Greek economy, as time goes on.
PERIES: From what I understand, James, the IMF had released a paper and taken a very studied position on the debt. What do you think of the plan they are proposing, and how successful do you think they will be in the negotiating table?
GALBRAITH: Well, the IMF realizes that it made a colossal mistake, historic mistake back in 2010 when it came into this program in the first place and overruled the views of staff and other, of certain of the executive directors, that the Greek debt at that time was unsustainable. They, for political reasons, they made a vast loan to a bankrupt entity. That is something they should never have done. It was in violation of their own rules. They are attempting at this point to avoid being drawn into that trap a second or a third time.
That is perfectly understandable. But again, whether they will be able to succeed in getting their terms accepted by the other creditors will depend largely on the relationship between Chancellor Merkel and her finance minister, Wolfgang Schauble. [I hear] that Chancellor Merkel is quite insistent on having the IMF in, and one hears also that Minister Schauble is quite adamant on the question of refinancing. So it’s an issue that will play out over the next few months.
PERIES: James, if what appears now is that the IMF has actually joined hands with the demands that Greece is making as well at the table, which is that they wanted to negotiate a reduction in the debt, do you think this will strengthen the position of the Greek government in the negotiations?
GALBRAITH: Well, it’s certainly positive from the Greek point of view that the IMF is being more clear-cut about the need for restructuring of the Greek debt. On the other hand, the IMF has also been very dogmatic about the program conditions that have been imposed on Greece, which are highly counterproductive. So in one respect the IMF is being helpful. In another respect it’s among the more obdurate and difficult of the negotiating partners of the creditor team.
PERIES: James, and finally, can you highlight for us this $50 billion in assets that the government of Greece is required to put or set aside in the new referendum? Would you give us some details about what that all means, and what you think of it?
GALBRAITH: It’s very hard to know. I know one senior official of the Greek government said quite candidly when this was first put on the table that the small difficulty was that those assets didn’t exist. That commercial assets on that scale were not to be found. The reality is that the privatization program over the first five years yielded very, very little revenue. Not a small fraction of that $50 billion. And it’s–unless one is talking about the banking system, which hasn’t been suggested, it is not at all clear where $50 billion of commercially realizable assets in the Greek public sector are going to be found.
PERIES: Now, some speculation in the financial press has been that Greece should sell off some of its small islands in the Mediterranean. Is that a serious consideration?
GALBRAITH: Well, perhaps Germany should return some of the artifacts that presently are on display in Berlin. They could negotiate over that. No, I don’t think it’s a serious consideration, and nor should it be.
PERIES: Very well. James, thank you so much for joining us today.
GALBRAITH: My pleasure.
PERIES: And thank you for joining us on the Real News Network.
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