IMF Seeks to Halt Aid to Greece, Bankruptcy Pending; Dominoes Will Fall

According to Der Spiegel, the IMF Wants to Stop Aid to Greece as soon as the ESM is up and running in September. At that time Greece would become bankrupt.

This is a Mish-modified translation from German:

The patience of the International Monetary Fund (IMF) with Greece comes to an end: According to to information obtained by SPIEGEL, senior IMF officials told EU leaders in Brussels that the IMF was no longer willing to provide additional funds for Greece.

The Troika estimates that Greece needs between ten and 50 billion € to meet targets, but many governments in the euro zone are no longer willing to shoulder new burdens. In addition, countries like the Netherlands and Finland, have linked their support because the IMF was involved.

The risk of withdrawal of Greece from the monetary union is now held in the countries of the Euro-zone control. To limit the risk of contagion to other countries, governments want to wait for the start of the new bailout ESM.

The judgment of the German Constitutional Court regarding the ESM on September 12th will come into play.

Dominoes Will Fall

I picked this story up from Roel at Automatic Earth. Here are some interesting point of view from Automatic Earth that I generally agree with.

It’ll be a lot of fun seeing the IMF, and European leaders, try to deny
the article and its implications. From what I understand, they want to
wait until the ESM is effective, and then dump Greece. The article may
trump any such intentions. Some things only work in secret, and once
Pandora’s box is open, they no longer do.

I still think it would be curious that the ESM, supposedly good for
€700 billion or so (if not more), would be used to “save” Spain and
perhaps Italy, but not Greece. For countries like Portugal and Ireland,
dumping Greece would mean they need to get very nervous about being the
next one thrown under the wheels and off the back end of the wagon.

The message might become that any and all reform and austerity measures
demanded must be adhered to very strictly or else. Politicians in these
other “borderline” countries might go along with it all, but will the
people? Do the Irish really enjoy the idea of being strangled into
submission? And will Spain really be “saved” once real debt numbers are
known?

It seems far more likely that getting rid of Greece will be merely the
first step in dissolving the entire eurozone. The rest of the dominoes
can then fall in rapid succession.

 Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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