As the Eurozone Teeters, the IMF Does Something Weird

• As the Eurozone Teeters, the IMF Does Something Weird
  by Don Quijones • July 4, 2015, http://wolfstreet.com/
  Wolf here: the IMF’s job is to bail out holders of sovereign bonds issued in a currency the issuer doesn’t control and can’t devalue (Mexico issuing bonds in dollars, Greece issuing bonds in euros). These bondholders are mostly banks. In a debt crisis, the IMF bails out these banks by buying their troubled bonds and then tightens the belts around the little guys so that the country can service the debt it now owes the IMF.
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  What happened in Greece? The banks that used to hold Greek debt have sold most of it to the European institutions, and some of it to the IMF; they have been bailed out years ago. The IMF has done its insidious job. Now mostly taxpayers are on the hook. But the IMF doesn’t give a crap about taxpayers.
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  By Don Quijones, Spain & Mexico, editor at WOLF STREET.
  As Europe teeters on a precipice of its own making, some people are beginning to wonder whether the IMF might have somehow discovered it has a conscience. Strange as it may sound, rumors of the IMF’s do-gooding began spreading on Friday after the Fund published a damning report on the sustainability of Greece’s finances and the Troika’s woeful mismanagement of the country’s debt crisis.
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  Granted, the report was deeply critical of Syriza’s negotiation strategies and governance of Greece. But the report’s real victims were the IMF’s two Troika partners, the European Central Bank (ECB) and the European Commission, both of whom had fought to prevent its publication.
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  The latest developments confirm what I argued four months ago in “Is the IMF About to Make Greece an Offer It Can’t Refuse?”: namely that the IMF could well prove to be an unlikely, albeit temporary, ally for Syriza. Now, by publishing its Debt Sustainability Analysis at the best/worst possible time, the Fund has massively improved Syriza’s chances of achieving a no-vote on Sunday.
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  Here’s more from The Guardian: 
  With days to go before Sunday’s knife-edge referendum that the country’s creditors have cast as a vote on whether it wants to keep the euro, the IMF revealed a deep split with Europe as it warned that Greece’s debts were “unsustainable”.
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  Fund officials said they would not be prepared to put a proposal for a third Greek bailout to the Washington-based organization’s board unless it included both a commitment to economic reform and debt relief (DQ: exactly what Varoufakis and Syriza have been demanding for the last five months).
  ….
  Mysterious Motivations
  The $300-billion question is why? Why did the IMF decide to extend Syriza, a radical leftist government, a helping hand in its hour of need? Has the IMF suddenly found a conscience? Has it lost interest in destroying national economies for the benefit of the world’s largest banks and richest investors, and instead decided to dedicate itself to defending the rights and interests of the little man?
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  read more.

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