Tag: Greece crisis

Standing At Thermopylae

By Peter Boone and Simon Johnson

No one in official Washington is seriously worried about Greece.  It’s far away, relatively small, and – anyway – “we already sent the IMF”.  Under current circumstances, this is very much like saying 2,500 years ago: We sent 300 Spartans to stand against a horde of Persians, so what’s the problem?

The Greek economic situation is worsening fast – with government bond yields rising rapidly today (currently the 10-year rate is around 7.5 percent).  Unless there is rapid action by the international community, this has the potential to get out of control.

There are three scenarios to consider: the nightmare, the “savior”, and the decision. Continue reading “Standing At Thermopylae”

Greece And The Fatal Flaw In An IMF Rescue

By Peter Boone and Simon Johnson.  This is a long post, about 3,500 words.

In 2003 the International Monetary Fund published yet another internal review with an impressively dull title “The IMF and Argentina, 1991-2001”.  But hidden in that text is explosive language and great clarity of thought – in essence, the IMF staff belatedly recognized that their decision to repeatedly bailout Argentina from the mid-1990s through 2002 was wrong:

“The IMF should refrain from entering or maintaining a program relationship with a member country when there is no immediate balance of payments need and there are serious political obstacles to needed policy adjustment or structural reform” (p.7, recommendation 4).

If Mr. Trichet (head of the European Central Bank), Ms. Merkel (German Chancellor), and Mr. Sarkozy (French President) have not reviewed this document yet, they should skim it immediately.  Because one day soon Greece will be calling on the IMF for a loan, and it seems mostly likely that the mistakes made in Argentina will be repeated.  Continue reading “Greece And The Fatal Flaw In An IMF Rescue”