Ayanna Nahmias, Editor-in-ChiefLast Modified: 00:49 AM EDT, 22 February 2012
FRANCE, Paris - In the latest Greek Tragedy, aka the 'Greek Deal,' the Troika seems determined to ignore the adage of “not pouring good money after bad.”
Greece, Ireland and Portugal are the first three countries in the euro zone to agree to ‘bailout’ plans with the so-called Troika consisting of the European commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) which place them under the direct tutelage of their creditors.
Although exact figures haven’t been publicly disclosed, it is believed that after this second bailout Greece will owe a total of €50 billion to the IMF, and according to German Finance Minister Wolfgang Schaeuble, bailout No. 2 for Greece will be roughly €23 billion.
The IMF, ECB and European Commission have concluded that Greece's debt could hit 160% of GDP by 2020. Even with recently implemented austerity measures which many claim are not substantive enough, Christine Legarde, the IMF’s managing director, seems poised to infuse additional capital into Greece’s foundering economy.
On Tuesday, Legarde issued the following statement, “The combination of ambitious and broad policy efforts by Greece, and substantial and long-term financial contributions by the official and private sectors, will create the space needed to secure improvements in debt sustainability and competitiveness.”
The obfuscated motivation behind the IMF’s desire to hurriedly conclude months of bailout negotiations despite Greece’s reticence and its likely inability to repay anything close to 100 cents on the drachma, has some questioning the deal.
According to financial news sources, this infusion has less to do with Greece and more to do with the rescue of the rest of Europe in an effort to prevent massive defaults and/or an exodus from the euro. Despite deep criticism, Legarde is faced with the same dilemma President Barak Obama wrestled with early in his presidency – capital infusion via bailouts or risk the total collapse of the economic system.
Legarde, as the IMF managing director is gambling that these measures will ensure the preservation of a 17-nation euro zone. Though many would argue that this is not central to the IMF's core mission, the global economies are so interdependent that like the game of Jenga, without careful positioning and risky calculations, it could all come tumbling down.