Sunday, 31 October 2010


The IMF, we are often told, is a fiscal hawk whose single-minded, ideological pursuit of fiscal consolidation overrides all other concerns, including those of an indebted country’s citizens and even its creditors.

Why then is the IMF being so dove-ish these days?

First, the EU and the IMF tolerated a complete lack of progress in effective control of spending at the local government level which made it impossible for Greece to report against one of the explicit quantitative targets of our adjustment programme.

Then they allowed us to not count municipal authority employees in our controversial census of civil servants.

Then they tolerated the cover-up of our ‘final’ 2009 deficit figures until after the November elections, even though nearly everyone and their dog knows the figure is now estimated at around 15.1% to 15.5%.

Then they allowed us to delay the submission of our draft law on tax administration reform (draft here and rationale here), which they must know is desperately important.

Then they allowed us to set out a dubiously budgeted EUR2.3bn - 2.6bn plan to subsidise employment by offering incentives conditional on a stay in redundancies.

And for good measure, they now seem set to allow us to put off our capital gains tax hike until 2012 (here).

I can only assume that our creditors are incredibly invested in a Socialist victory in the 7 November municipal and prefectural elections, which they see as a make-or-break moment for our Government. Our creditors’ fears are well-founded. As I’ve explained here, while I hold most of them in deep contempt, the Socialists do offer our creditors their only hope of a stable and compliant government in Greece. Don’t forget, the Greek Right has foolishly tried to paint itself as the Greek version of Hungary’s Fidesz by claiming that signing up to the Memorandum was a choice made freely by the Prime Minister despite a host of alternatives (Russian money, anyone?) and that they would be able to bring Greece’s structural deficit down to 0% in two years (LOOOOOOOL).

Yorgo's thinly-veiled threat tο call a snap election unless his party does well in the upcoming elections has gone down very badly among Greeks, who resent being blackmailed. What they do not understand is that it is the IMF and our creditors that Yorgo is blackmailing. His signal says: 'cut me some slack, make me look good, or I swear I'll bring this whole motherf*cking place down with me.'

What our creditors and, worse, our Government, seem to forget is that the protest calendar is an even more important determinant of Greek bond prices than elections and that it is absolutely pulsing after 7 November. The 17 November celebrations are traditionally accompanied by an explosion of violence and last year’s spilled over into December due to the murder of a teenage protester.  Then four people died in May, and this too will pale in comparison with what could happen this November. 

It is amazingly short-sighted of the Government to kick the can further down the road – 7 November will simply never give it a mandate strong enough to survive another bout of austerity and the people will feel deeply betrayed. And although bad news before the 7th might dent its substantial lead in the polls, bad news between the 7th and the 17th could spark an urban war.

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