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IMF Chief, Germany, Getting Tough With Greece

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IMF Chief Christine Lagarde says Greece's troubles aren't over despite two bailouts

Greece should not be complacent now that it’s getting a second bailout to prop up its failed economy, International Monetary Fund chief Christine Lagarde and German Finance Minister Wolfgang Schaeuble – a constant critic – have warned in a double-barreled shot reiterating the demands of international lenders who’ve saved the country. In an interview on CBS television, Lagarde warned that Greece’s solvency and the the future of the Eurozone of the 17 countries using the euro is not assured, despite Draconian austerity measures punishing Greeks.

“It is not yet certain that Greece will avoid bankruptcy or a forced exit from the European Union and Eurozone,” Lagarde reportedly told CBS in comments that appear to be intended as a warning to Greek political parties preparing for snap polls, expected on May 6. In a related development, Gerry Rice, head of external relations at the IMF, told Greece’s SKAI TV that pledges from Greece’s two main parties, socialist PASOK and conservative New Democracy, that the terms of the country’s second bailout from foreign creditors would be met were “reassuring.”

Both New Democracy leader Antonis Samaras and PASOK’s new leader, former Finance Minister Evangelos Venizelos, said they will carry out the pay cuts, tax hikes, slashed pensions and fire 150,000 workers over the next three years, a stance that has both parties plummeting in polls and boosting anti-bailout parties. Greece is surviving on a first round of $152 billion in rescue loans from the Troika that includes the IMF and the European Union and is set to receive another $173 billion, a deal that comes with a $134 billion write-down in debt by imposing losses of 74 percent on investors. That, however, has locked Greece out of the private markets and makes the country reliant on  its public lenders – who may have to take similar losses as even the massive aid and debt reduction hasn’t kept Greece from teetering on ultimate economic failure.

The tough talk comes even as Greece’s current interim shaky hybrid New Democracy-PASOK government overseen by caretaker  Prime Minister Lucas Papademos, a former ECB Vice-President, is split over whether the country will need a third bailout and as the lagging poll numbers for the two major  parties mean another coalition government of ideological enemies who are currently squabbling looms, creating more uncertainty.

CBS also interviewed Schaeuble, whose country has played a dominant role in shaping Greece’s austerity program and who reportedly said that Greeks were seeking a “scapegoat” by blaming Germany for their fate. “When entire nations live beyond their means and are then obliged to adopt austerity … it is logical that they would blame others,” Schaeuble is quoted as saying in the interview. “It is normal that people suffering due to their own mistakes will push the blame onto others,” the minister is said to have added, noting that Germany “does not want to occupy anyone.” He added: “Germany had such ambitions in the past and failed,” an allusion to World War II and the brutal Nazi occupation of Greece, even as some Members of Parliament in Greece have pushed Germany for war reparations.

“The ill will many Greeks feel toward Germany for imposing painful financial conditions on the massive loans the country made to them are just a normal response to a difficult situation,” he added.  He also said the enmity Greeks feel toward Germany for the WWII era is “part of politics,” but he said Germany doesn’t want impose its will on others, but that Greeks who’ve been profligate spenders and wastrels for generations have to pay for their own mistakes and not rely on other countries to keep bailing them out.

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  • Quoting

    The website of CBS where the talk about tomorrow interview says: “There’s still medicine to be taken. And that’s what’s happening in most
    of these southern Eurozone states at the moment, plus Ireland,” she
    says, adding that it is not certain that Greece will avert bankruptcy
    and a forced exit from the EU and its common currency, the euro.
    To put the quotes on the second part of the sentence is misleading. We’ll have to wait until tomorrow to see her exact quote.