The transcript of the teleconference between Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece, exposed the fact that the IMF is anticipating a potential Greek bailout default that would occur in concert with UK’s ‘Brexit’ referendum on EU membership.
The discussion shows the IMF strategizing about telling Germany that they will abandon the Troika (composed of the IMF, European Commission and the European Central Bank) if the European Commission and the IMF fail to reach a Greek debt relief agreement in an effort to force compliance.
The leak clearly establishes the IMF linking the Greek issue with UK referendum, creating a dynamic of increased risk of more widespread political destabilization in the EU, as noted by Bloomberg.
The IMF officials said a threat of an imminent financial disaster was necessary to force a “decision point,” leveraging German Chancellor Angela Merkel on debt relief and Greece into accepting IMF “measures” against pensions and working conditions, according to the transcript.
The UK referendum was said to add a complication that needed to be negotiated around – delaying a possible “moment of truth” until after the June 23 Brexit vote.
This leaked transcript lays out the IMF plan to utilize Greece as a pawn to force German Chancellor Angela Merkel into accepting the position of the IMF at a crucial point after the ‘Brexit’ referendum.
According to the teleconference transcript:
THOMSEN: Well, I don’t know. But this is… I think about it differently. 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 they were about to run out of money seriously and to default. Right?
THOMSEN: 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 and so, at some stage they will want to take a break and then they want to start again after the European referendum.
VELKOULESKOU: That’s right.
THOMSEN: That is one possibility. Another possibility is one that I thought would have happened already and I am surprised that it has not happened, is that, because of the refugee situation, they take a decision… that they want to come to a conclusion. Ok? And the Germans raise the issue of the management… and basically we at that time say “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?” Right? That is really the issue.
VELKOULESKOU: I agree that we need an event, but I don’t know what that will be. But I think Dijsselbloem is trying not to generate an event, but to jump start this discussion somehow on debt, that essentially is about us being on board or not at the end of the day.
THOMSEN: Yeah, but you know, that discussion of the measures and the discussion of the debt can go on forever, until some high up.. until they hit the July payment or until the leaders decide that we need to come to an agreement. But there is nothing in there that otherwise is going to force a compromise. Right? It is going to go on forever.
The Greeks are upset with the revelations, demanding the IMF explain the “disaster” remarks contained within the explosive leak, with Prime Minister Alexis Tsipras publically questioning whether Greece can trust the supranational lender.
There is a now distinct possibility of the debt negotiations being compromised due to the disclosure of the leaked transcript. A letter from Tsipras to IMF managing director Christine Lagarde demanded answers regarding a number of damning comments made during the discussion.
In his letter, Tsipras questions whether negotiations are taking place in good faith, and if Thomsen and Velculescu’s implicit statements relating to the IMF relying on another crisis-inducing “credit event” to force Greece’s hand “reflects the official IMF view.”
“Using a credit event as a means to pressurize Greece and the other member states is clearly beyond the bounds of the negotiation process as we understand it,” Tsipras wrote.
“I sincerely hope that the IMF position is to reach a quick, successful and sustainable conclusion of the review and I am sure you will take all the necessary measures to make sure the negotiation process will remain on track.”
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