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If the IMF Is Correct, Excessive Austerity Is Not Solving But Exacerbating the Long-Run Debt Problem: The Non-IMF Members of the European Troika Are Missing the Point Weblogging

Alan Beattie and Peter Spiegel:

Troika a barrier to IMF new fiscal faith: Christine Lagarde’s open disagreement with Wolfgang Schäuble on Thursday showed the EU’s most influential member state starkly disagreeing with the IMF. And the ECB, whose prospective use of “outright monetary transactions” or direct bond purchases will give it much more prominence in any rescue for Spain or Italy, will probably be even slower to come around…. Throughout this year, the fund has been struggling to get the other troika members to accept that their debt sustainability analyses for Greece have systematically been too optimistic…. If rapid fiscal tightening is exacerbating rather than ameliorating Greece’s debt burden, the implication is that official money in the form of fresh lending or writing down existing loans will have to fill the financing gap. Paul de Grauwe… says of eurozone officials: “Sometimes when you talk with them, they accept the intellectual argument – but then claim they are bound by treaties and are unable to act on it”.