Sunday, July 03, 2011

Do IMF rules allow another €3.3 billion payment to Greece?

The question posed in the headline to this posting, is not some 'way out' academic matter, affecting none. UK contributions to the IMF represent some 4% of payments made, so we are talking some £120 million pounds of money which may as well be set alight with matches for all the good it will do!

This at a time of austerity packages, rising inflation, falling manafacturing output, VAT hikes, closing hospitals, falling school standards, benefit cuts and a likely growing economic tsunami which will sweep aside much of the remaining equity many British people still believe they hold in their houses!

Let us examine what we do know.

1. On 27th May the BBC reported, "Luxembourg Prime Minister Jean-Claude Juncker said IMF rules may stop it paying because Greece cannot guarantee its solvency for the next 12 months" These reports were later widely confirmed, as the IMF rules did not permit transfers to countries unable to guarantee financing for at least one year ahead.

2.  The second bail out from the EU has, according to all press reports linked in the posting below of last evening, yet to be agreed. The IMF therefore cannot release the €3.3 billion, its share of the next Greek payment, until the EU has agreed the second Greek Bail Out!

3. Mr Jose Vinals, Financial Counsellor and Director, Monetary and Capital Markets Department at the IMF on 17th June, linked here, stated:

The second condition is that there is a need for assurances that the program will be fully financed.

Again later in confirmation of that point Mr Vinals repeated:

....the Fund is ready to help, but for that, there are some conditions that need to be met. One is that, as I said, the Greek authorities continue to endorse the program that has been already agreed with them. There has been some uncertainty given the political developments in Greece, but we very much hope that the new government will continue to strongly endorse this program, and the other condition that we need is that there will be full financing assurances. On this we are hopeful that progress will be made and that the forthcoming meetings of the Euro Group will give the green light to these.

And of course we will have to submit all this to our Board for a decision,

We must therefore presume that the IMF board has not, indeed according to its own reported rules (I have searched for the exact statement but as yet have not found it), indeed CANNOT, sign off on the transfer until the bail out Mark II package for Greece is fully approved by the FULL EU, which must include Greek collateral against the share of the AAA rated Finns.

EU statements that the IMF package is agreed must surely, yet again be untrue!

We presume this section of this morning's Sunday Telegraph report merely highlights this deliberately engendered confusion:

The board of the IMF is expected to rubber-stamp the €12bn instalment, of which it provides a €3.3bn share, this week. Caroline Atkinson, spokeswoman for the international lender, said it welcomed the decision from the eurozone politicians.

"This commitment – together with the recent parliamentary passage of the necessary fiscal measures in Greece – will enable the IMF’s executive board to consider ... the release of the next tranche under the current stand-by arrangement with Greece," she said.

To further confuse their readers the Telegraph editor has placed a large box of other content between the paragraphs above, presumably in the hope that the considerable difference between a "rubber stamp" and a "consideration" will not be noticed by his readers! What dreadful and ill-informed, so-called, journalism!

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