Christine Lagarde. Demotix/Omar Franco Perez Reyes. All rights reserved.Reports out of Berlin and Brussels convey the message that the major powers in the European Union want regime change in Athens. British MP Caroline Lucas labels this rhetoric equivalent to "an attempted coup". Allegations of incompetence and duplicity motivated this apparently fervent desire by the EU leaders for the political exit of Alexis Tsipras along with the euro exit of his country.
For example, Jean-Claude Juncker, president of the European Commission, feels "betrayed" by the Greek prime minister. That being faithful to the EC president would have required Mr Tsipras to betray his election pledges to the Greek people seems not to have occurred to Mr Juncker; or if it occurred to him it was dismissed as irrelevant.
Duplicity and incompetence have certainly characterized the Greek debt crisis, though these emanate not from Athens, but Washington, Brussels and Berlin. Indeed, the duplicity and incompetence shown by the head of the International Monetary Fund would result in pressure to resign or even prosecution in organizations with meaningful accountability mechanisms (the IMF and its staff are immune from prosecution for actions carried out in pursuit of their official work).
Throughout the negotiations between the Troika and the Syriza government the spokespersons of the IMF have justified the organization's position by the argument that "it has rules" that must be followed, and these rules preclude any flexibility.
One set of these rules specifies the conditions under which the IMF makes loans to a government and provides guidelines for the amount to lend in each case. All loans require a "debt sustainability analysis" (DSA). The purpose of the DSA is to "...guide the borrowing decisions of [the debtor government] and [match] financing needs with...prospective repayment ability, taking into account each country's circumstances."
The components of this guidance are quite specific: 1) analysis of a government's debt twenty years into the future; 2) "stress" tests for "vulnerability to external and policy shocks"; and 3) assessment of "debt distress" at the time of the IMF lending.
Another IMF document summarizes the possible outcomes for a DSA as follows:
...[P]ublic debt can be regarded as sustainable when the primary [fiscal] balance needed to at least stabilize debt under both the baseline and realistic shock scenarios is economically and politically feasible...Conversely, if no realistic adjustment in the primary balance—i.e., one that is both economically and politically feasible—can bring debt to below such a level, public debt would be considered unsustainable. [Emphasis added]
