BY ROBERT ROMANO | JUNE 10, 2015
U.S-backed IMF loans prolong Greece’s agony
$14.3 billion.
That is how much the U.S. has lent to troubled European nations Greece, Ireland, and Portugal through the International Monetary Fund (IMF) during the years-long financial crisis there, data from the bank shows.
Overall, these three countries have borrowed $54 billion via the IMF, accounting for 55 percent of loans from that institution.
The IMF was never intended to bail out first world nations, and yet that is precisely what the bulk of funds are now going for there – bailing out socialist governments and the banks that lent them the money in the first place.
And now it may be coming back to bite, with Greece threatening to default on its loans. It skipped a €300 million payment due last week that Athens promises it will still pay this month.
But €1.7 billion of state pensions and salaries are due at the end of June, and the Greek government says it will pay those before it pays back the IMF loans.
The delayed payment to the IMF comes after a partial €100 billion default on some €355 billion of government debt in 2012.
But the haircut barely helped. Greek government debt once again stands at €323 billion, over 175 percent of the country’s Gross Domestic Product.
10-year treasuries are at 11.6 percent there. Short-term paper rates are even higher. 2-year treasuries are over 25 percent – an inverted yield curve in Greece, signaling either a recession or perhaps a default is in the offing.
With unemployment still over 25 percent, and the economy in recession for years now, there is little hope that the bailout regime is doing anything but prolonging that nation’s pain as it faces a debt it cannot possibly repay.
In other words, the loans – which U.S. taxpayers are underwriting – are not even helping. Instead, the country’s finite resources are being diverted to pay off creditors at exorbitant interest rates, and the economy is still on life support. In the meantime, savers are pulling their money out of Greek banks, fearful that the government may be about to issue capital controls.
Greece would be better off defaulting, or simply leaving the Eurozone and restructuring its debts in a new drachma.
U.S. funds are made available to the IMF through the $165 billion of credit lines Congress has created over the years, including a $100 billion New Arrangements to Borrow that was enacted in 2009 in response to the recession and signed into law by President Barack Obama.
At the time, the Obama administration promised that the new funds would serve a “central role in resolving and preventing the spread of international economic and financial crises.”
So much for that.
Robert Romano is the senior editor of Americans for Limited Government.
