IMF clashes with EU over Greek austerity mire

So , now we see an open rift between the EU and IMF on what the way forward should be ...... Troika becoming a duet ?

IMF clashes with EU over Greek austerity mire

by Dimitris Yannopoulos 12 Jan 2012

Christine Lagarde (File photo) A long-brewing rift between the IMF and the EU over the failure of their austerity programmes in Greece burst into the open on Thursday following an informal IMF press-briefing of Greek correspondents in Washington.   Thursday morning reports from that briefing on Mega and Ant1 TV channels said that the IMF mission staff in the troika sought to distance themselves from a "counterproductive set of austerity measures" imposed on the country under the insistence of the EU side.   The reports came in the wake of the talks which the IMF managing director Christine Lagarde held on January 10 with German Chancellor Angela Merkel in Berlin and French President Nicolas Sarkozy in Paris.   No official press conference or communique was issued after Lagarde's shuttle meetings. But leaks in Handlesblatt and other EU newspapers on January 11 said that the IMF head had warned Merkel and Sarkozy that the parameters of the second bailout package for Greece agreed on October 26 had changed.   Lagarde reportedly said that, given the deterioration of Greek fiscal and economic data, the new bailout loan should be increased by "tens of billions of euros" from its original 130bn euro loan target.   Furthermore, the IMF estimated that the Greek debt held by private bondholders would require a "haircut" of more than 50 percent (or 100bn euros) of its face value in order to become sustainable, especially if a significant minority of investors refuse to participate in a "voluntary" private sector involvement (PSI) deal.   The senior IMF sources in Washington noted that there were "unprecedented delays" in the proper implementation of fiscal and structural reforms linked to the first 110bn euro bailout programme. Instead, "horizontal austerity measures are constantly being adopted that are leading nowhere, whilst further wage and pension cuts are unjustified because the only way to improve competitiveness is through growth-creating market liberalisation, the opening of closed professions and productive investments". Rather than pushing through blanket wage cuts on underpaid groups of employees in the public and private sectors, the IMF sources stressed that selective reductions in exorbitant salaries and closure of wasteful work stations needed to be introduced in dozens of public utilities (DEKO) and other state agencies "in order to attract foreign investment".   "We have spoken repeatedly about reforms in the labour market to the extend that certain elements in the structure of the Greek state constitute a hindrance to the creation of new jobs," the IMF sources were quoted as saying. "We have said that this leads to rising unemployment and something must therefore be done about it," the sources added, without including the private sector minimum wage or the summer and Christmas bonuses among the measures that could overcome such bottlenecks.   The senior IMF sources speaking under conditions of anonymity also said that IMF mission chief Poul Thomsen would probably not join his counterparts from the EU (Mathias Morse) and ECB (Klaus Mazouch) in their next inspection trip to Athens on January 17, underlining the seriousness of the clash between the troika's twin pillars.