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Sunday, July 22, 2012 12:08 PM

IMF Seeks to Halt Aid to Greece; September Bankruptcy Awaits; Dominoes Will Fall

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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 Ilargi 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.
There's more in the AE article including a discussion of the resignation of Peter Doyle, former division chief in the IMF's European Department, who, upon resigning, shared a few of his thoughts on the fund: "After twenty years of service, I am ashamed to have had any association with the Fund at all..."

Everyone Prepared to Pull the Plug

DW has a bit more information in IMF to provide no new funds to Greece 
In an article published on its website, Spiegel cites unnamed senior European Union sources in Brussels who told the news magazine that the International Monetary Fund (IMF) had signaled it would not contribute to any further aid for Greece.

The  report comes ahead of a planned visit to Athens by a team of auditors from the troika of the European Commission, the European Central Bank (ECB) and the IMF. They are to conduct another inspection of the new government's economic program to determine whether Greece is doing enough to comply with the terms of its second international bailout to merit receiving the next tranche of funds.

Just this past week, leading Greek politicians pushed back talks on how to cut almost 12 billion euros ($14.6 billion) from the budget after it became clear that they were far from reaching a comprehensive agreement.

On Friday, the ECB increased the pressure on Greece to comply with the terms of the bailout when it announced that it would stop accepting the country's bonds as collateral in return for ECB funding, at least until after a positive verdict from the troika.

In a further indication that patience may wearing thin among Greece's paymasters, German Foreign Minister Guido Westerwelle on Saturday ruled out the possibility of relaxing the conditions of Athens' second bailout.
Many signs suggest that everyone is finally ready to pull the plug on Greece. Hundreds of billions of euros have been wasted in the last three years attempting to stop the unstoppable.

Mike "Mish" Shedlock
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