The financial conditions Greece has to meet have been eased as a result of the virtual shutdown of its economy in July, but they have not been eased enough.Greece is expected to run a surplus on its budget, once debt interest payments are excluded, of 0.5% of GDP in 2016, 1.75% in 2017 and 3.5% every year thereafter.
These are fantasy projections based on unrealistic assumptions. They will already be out of date by the time the first review is conducted. Greece has been set up to fail its review, at which point some of the hardline European countries will cut up rough. They will say that the next tranche of bailout cash should be withheld and that all talk of debt relief should be stopped until Greece gets back on track.
The IMF, however, will not give its imprimatur to the deal unless Greece’s debt burden is reduced sufficiently to make it sustainable. Christine Lagarde, the fund’s managing director, has already told Greece’s European creditors they will need to be far more generous. If anything, that position is likely to harden as it become clear that Greece’s economic and financial woes are far more serious than currently thought.Heads, the Greeks lose; tails, the Greeks cannot win.