Rules are there to be broken....if it saves your skin

Graham_Devon

Quite a shocking report about how the IMF handled the Greek crisis, breaking 3 out of 4 of their own rules on lending to bankrupt countries all to save themselves.

The Greek people themselves were brushed to the side in order to save the politicians.

The whole thing is just a colossal train wreck.

The internal report on the handling of the Greek crisis has detailed a catalogue of errors, which led to the IMF breaking three out of four of its own rules relating to lending money to bankrupt countries.

It also admits that the impact of austerity policies in Greece was badly underestimated as EU institutions and leaders tried to save their political skins at the expense of the Greek economy.

The report, leaked to the Wall Street Journal, explained that in 2010 the IMF lent €36bn (£30.5bn) to Greece despite a risk “so significant that staff were unable to vouch that public debt was sustainable”.

While the IMF scaled back its contribution to a second Greek bailout in 2012, amid growing concerns over whether debt could be paid back without devastating economic consequences, its loan to Greece is the largest ever in the fund’s history, relative to the size of the recipient country’s economy.

Most damaging of all is the IMF admission that the Greek bailout was not drawn up to help Greece but was a “holding operation” that “gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy”.

What is the point in having any rules if you are just going to break them to try and save yourselves ? How can we take the IMF seriously?

You can see what they mean now when they say the Euro trumps all and everything will be done to save it.

http://www.telegraph.co.uk/finance/financialcrisis/10101660/EU-put-eurozone-safety-before-Greece-during-bailout-IMF-report-claims.html

CLAPTON

Some 'i's and 't's may have been dotted and crossed but is there anything here we didn't know ?

TruckerT

Here is another quote from the article....

"The prevarication also cost eurozone taxpayers dearly because during the two-year period between May 2010 and the summer of 2012, when a “haircut” was finally agreed, the debt burden had shifted from private banks to EU governments and the IMF"

So, yet again, the banks handed over the costs of their business failure to the taxpayer, and walked away.

But I thought I heard a news item, within the last couple of days, that Greece has staged some kind of miracle recovery, and is likely to be able to borrow at normal rates within the next year or two.

TruckerT

HAMISH_MCTAVISH

It also admits that the impact of austerity policies in Greece was badly underestimated as EU institutions and leaders tried to save their political skins at the expense of the Greek economy.

Merkel in particular.

chewmylegoff

What were the IMF supposed to do. It's all very well having a set of rules designed to deal with a future situation, but the rules are written from a hypothetical standpoint. When a country is actually bust, particularly when it is a member of a single currency bloc, you have to deal with the situation at hand, I suppose.

chewmylegoff

TruckerT wrote: »

Here is another quote from the article....

"The prevarication also cost eurozone taxpayers dearly because during the two-year period between May 2010 and the summer of 2012, when a “haircut” was finally agreed, the debt burden had shifted from private banks to EU governments and the IMF"

So, yet again, the banks handed over the costs of their business failure to the taxpayer, and walked away.

But I thought I heard a news item, within the last couple of days, that Greece has staged some kind of miracle recovery, and is likely to be able to borrow at normal rates within the next year or two.

TruckerT

This is a rather short sighted conclusion (in the quote you have reproduced) as if the banks had taken the full hit on Greek debt they would have gone bust. It is likely that the taxpayer would have bailed out any systemically relevant banks.

TruckerT

chewmylegoff wrote: »

This is a rather short sighted conclusion (in the quote you have reproduced) as if the banks had taken the full hit on Greek debt they would have gone bust. It is likely that the taxpayer would have bailed out any systemically relevant banks.

As time goes by, it gets harder and harder to understand why banks should be protected from going bust.

There are many taxpayers, and wannabe taxpayers, in urgent need of 're-capitalisation', but they are still expected to bear the cost of the bailouts (possibly for more than another decade) whilst the banks continue business as normal.

TruckerT

Thrugelmir

TruckerT wrote: »

As time goes by, it gets harder and harder to understand why banks should be protected from going bust.

Banks under pin the whole economic fabric we have today. The consequences would be devastating.

Understand the rise of German Nationalism from the end of WW1 onwards. Then you'll appreciate how people will do what's best for themselves and their families.

TruckerT

Thrugelmir wrote: »

Banks under pin the whole economic fabric we have today. The consequences would be devastating.

That was the excuse 5 years ago, since when we have been repeatedly told that similar meltdowns will no longer be possible.

Understand the rise of German Nationalism from the end of WW1 onwards. Then you'll appreciate how people will do what's best for themselves and their families.

I guess that would include benefit fraud (as well as tax avoidance)

TruckerT...

CLAPTON

TruckerT wrote: »

As time goes by, it gets harder and harder to understand why banks should be protected from going bust.

There are many taxpayers, and wannabe taxpayers, in urgent need of 're-capitalisation', but they are still expected to bear the cost of the bailouts (possibly for more than another decade) whilst the banks continue business as normal.

TruckerT

Banks are protected from going bust because banks have no (or every little ) money of their own.

They only have YOUR money (current a/c and savings) and businesses' money.

So if the government allows banks to go bankrupt then that means ordinary people can't pay their bills (mortgages, utilities, food etc) and businesses can't pay salaries or their suppliers and so go bankrupt.

TruckerT

CLAPTON wrote: »

Banks are protected from going bust because banks have no (or every little ) money of their own.

They only have YOUR money (current a/c and savings) and businesses' money.

So if the government allows banks to go bankrupt then that means ordinary people can't pay their bills (mortgages, utilities, food etc) and businesses can't pay salaries or their suppliers and so go bankrupt.

The banks have all the money, right?

TruckerT