Dimitri Lascaris Report: The IMF knew that the Greek debt was unsustainable and demanded that it be written down, but this proposal was rejected by the Troika, with consequences that could include a rupture within SYRIZA

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Story Transcript

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Dimitri Lascaris report on The Real News Network. I’m Sharmini Peries coming to you from Baltimore.

So joining us today is Dimitri Lascaris. He’s a partner with the Canadian law firm Siskinds where he heads the firm’s securities class action practice. He’s also a board member of The Real News Network. As always, Dimitri, thank you for joining us.

DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER: Thank you, Sharmini.

PERIES: So Dimitri, you’ve been following what has happened since last week, June 5th. There was a payment to be made by Greece to the International Monetary Fund. What happened?

LASCARIS: Well, let’s–in the weeks leading up to the crisis, an important schism seemed to have developed in the creditor group for Greece, and that group is comprised principally of the IMF, the ECB, and the European Union. And the schism related to whether or not, the question of whether or not Greece’s debt was sustainable and needed to be written down. And the IMF was taking the position that for some period of time, and it was becoming increasingly aggressive about taking this position that Greece’s debt needed to be written down because as anybody with any economic sensibility or financial sensibility knows, Greece’s debt is unsustainable. However, the ECB and the EU were opposing this position.

And so on about June 1st Angela Merkel convened a meeting with Christine Lagarde, the managing director of the IMF, Jean-Claude Juncker on behalf of the EC, and Mario Draghi on behalf of the ECB, she also invited President François Hollande from France, to try to formulate a unified position vis-a-vis Greece. And what emerged from that was something which was characterized as a final offer, a unified final offer on behalf of these three groups that comprise the Troika. And the IMF’s demand that Greece’s debt be restructured, that it be written down, and that its creditors recognize a loss on its loans to Greece was dropped.

The precise terms of this unified offer are not clear, but what is clear is that the offer, which from the perspective of the Greek government was an ultimatum, generated a very hostile reaction. And this precipitated an op-ed by the Greek prime minister Alexis Tsipras in Le Monde where he effectively lambasted the creditors of Greece, the Troika, for taking positions that were unduly aggressive and unrealistic, and not sufficiently deferential to the democratic mandate of Syriza. And he responded, or the Greek government responded with their own offer.

And the details that have emerged from that offer really I think drive home the point, the Greek offer, that this government, at least the leadership of this government, is anything but radical. And the principal feature of the offer revolves around the question of the primary surplus, which is the surplus that remains after the payment of interest on Greek debt. And apparently the Greek government has offered to target a primary surplus for Greece in 2015 of 0.6 percent of GDP, 1.5 percent of GDP for 2016, 2.5 percent in 2017, and then from 2018-2022, 3.5 percent. And by the way, the target for 2018-2022 is what the Troika has itself demanded, 3.5 percent of GDP.

This is really an extraordinarily deep commitment to austerity at the end of the day, because it will force the Greek government to slash spending even further in an economic depression. What it should be doing is engaging in deficit spending and it should not hesitate to incur a primary deficit in the current circumstances. Greece is suffering a humanitarian crisis. But it’s effectively acceded to the notion that even in these extraordinarily dire economic circumstances it’s appropriate for the government to generate a significant primary budget surplus. So the agenda of the government at this stage, its negotiating position is anything but radically left.

Notwithstanding that, the Troika’s taking the position that the offer of the Greek government is not sufficient. And this appears to have, it’s on the verge of generating a very serious rupture within Syriza. In particular, the left platform, which appears to enjoy the support of something in the range of 30-50 percent of Syriza’s MPs, is extraordinarily upset by the government’s position. Even more upset by the demands of the Troika. And it’s unclear at this stage whether the government can survive much longer.

And within this context, a very interesting letter appeared today in the Financial Times. It was authored by 20-plus leading economists from around the world, as well as the former prime minister of Italy Massimo D’Alema, in which they pleaded, explicitly pleaded with the Troika to demonstrate what they termed economic sanity and to relax the strictures of the austerity program, and to recognize the importance of the mandate that was given to Syriza by the Greek electorate in January of this year.

Unfortunately what you’re dealing with is not only a political class in Europe that has become radically neoliberal, but they’re heavily, heavily invested in the austerity program. It would probably amount to political suicide for them at this stage to acknowledge the obvious reality that austerity was misconceived from the beginning and has achieved precisely the opposite effect of what was intended, namely that Greece’s ability to service its debts be enhanced. What’s happened is that its debt to GDP ratio has soared under austerity. And they’re also deeply invested in this bailout, which at the end of the day was not a bailout of Greece but a bailout of European banks.

And if they agree to a restructuring of Greek debt–which is inevitable. It will happen, it’s just a question of when. Then they’ll no longer be able to perpetuate the illusion that the creditors of Greece, the Troika, have not incurred massive losses on these loans to Greece. And they’re going to have to account to the electorate of Europe for the fact that losses that ought to have been borne by Europe’s banks were transferred to the shoulders of European taxpayers. So what they’re basically trying to do is to try and kick the can down the road and let some subsequent generation of politicians in EU have to bear the consequences of the EU electorate waking up to the reality of what was done in 2010.

That’s the situation. So there’s not much hope at this stage for economic sanity on the part of the Troika despite this plea of these leading economists. And all of this is happening, unfortunately, within a background where the mainstream media, which is overwhelmingly neoliberal, is helping the political class of Europe to obscure the truth, unfortunately.

PERIES: Dimitri, as always, thank you so much for your report today.

LASCARIS: Thanks for having me, Sharmini.

PERIES: And thank you for joining us on The Real News Network.

End

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