IMF contra EU - the typical chicken game

aus dem heutigen Eurointelligence Newsbriefing

We are once again at a dangerous moment in the crisis. We have already reported that the IMF may refuse to pay the next, and fifth loan tranche to Greece, which totals €12bn, by June 29. The IMF’s share of that tranche is €3.3bn. Jean-Claude Juncker came out yesterday, as reported byFrankfurter Allgemeine, that an IMF refusal to continue the payments would throw Greece into an immediate, and full default.  "If the Europeans have to acknowledge that the disbursement from the IMF on June 29 cannot be operationally implemented, then the expectation of the IMF is that the Europeans would step in for the IMF and take upon themselves the IMF's portion of the financing. That won't work because in certain parliaments -- Germany, Finland and the Netherlands and others, too -- there is no preparedness to do so." Juncker is obviously piling massive pressure on Greece and the creditor countries to ensure the conditions for further loan disbursements. The big issue for the IMF is not only non-compliance on the part of the Greeks, but the most important problem is the lack of readiness by the EU to secure follow-on financing in 2012. So we are at an impasse: The IMF won’t do anything until the European agree to a 2012 finance package, while the Europeans wait for the IMF’s review to come out before they can agree on such a package. Dutch PM Mark Rutte, was quoted by Reuters as saying yesterday: “"We are looking very carefully at what the IMF does ... and if they don't say a new tranche in loans should go the Greeks, then we won't either."

Frankfurter Allgemeine reports that the Troika will issue its presumably negative report on Greek debt sustainability next week.  In other words, the probability of a serious accident is very large indeed, a prospect that spokes stock and bond markets yesterday, as investors pushed German 10 year yields down below 3% again – a flight into safety.