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Greek Mess Still Unresolved

Walter Russell Mead

The EU and IMF are still wrestling over Greek debt. The Financial Times:

The eurozone is running out of time to secure an agreement this year on International Monetary Fund participation in Greece’s €86bn bailout amid splits over the country’s economic reforms, budget targets and debt relief.

The fund still wants reluctant eurozone capitals to provide more detail about how far they will go to ease Greece’s mountainous debt burden. […]

People familiar with the talks also say a decision on IMF participation in the bailout is on hold until the latest progress review of the Greek programme, which began last month, is completed.

Officials are racing to make headway ahead of December 5, the last scheduled meeting this year of eurozone finance ministers. The IMF has indicated it will seek to decide by the end of 2016 on its participation.

The Germans want IMF involvement in the Greek debt issue as a way of certifying to skeptical German voters and lawmakers that the Greek reform program is serious and tough. But the IMF doesn’t want to sign on—because it thinks Germany’s demands are so tough they are doomed to fail.The IMF, correctly, says that Greece’s debts are just too big to be repaid and that a substantial percentage of them will have to be cancelled. The EU is in an “extend and pretend” mode: Just keep rolling things over and pretend that at some point in the future a herd of magic unicorns will descend from Mount Olympus and pay the Greek debt. This is exactly the kind of wishful thinking that the IMF wants to oppose.

The German political establishment doesn’t want to face the reality that Greece cannot repay its debts in part because of public opinion and in part because there are lots of other countries in Europe with large debts who will want the same kind of treatment.

Europe has wasted almost a decade since the euro crisis first surfaced, and the problems of the currency are nowhere close to being solved. The monetary union that was to be the engine of European integration is undermining and weakening the EU; this is something the European establishment is not yet willing to face. But facts are facts, and unless Europe can look seriously and realistically at the horrendous mess that the euro fiasco has created, the Union will continue to degrade.

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