The IMF already pulled out of negotiations last Thursday after expressing frustration with Athens for refusing to compromise in several key areas such as pension reform and tax increases with the value added tax (VAT).
On Sunday IMF Chief Economist Oliver Blanchard, one of the world’s most cited economists, explained in an article he wrote that the longer Greece waits to adopt reforms, the more that Greece’s creditors will be stuck paying the bill.
“To the extent that the pace of reform is slower, creditors will have to provide more debt relief” Blanchard wrote.
Blanchard pointed out that Greece’s pensions and wages account for 75 percent of public spending while pension expenditures account for over 16 percent of Greece’s GDP.
Blanchard explained that a reduction of pension expenditures of 1 percent (out of 16 percent) is needed with Greece’s GDP.
Blanchard said that it could be done through necessary pension and VAT reforms that still protects Greece’s poorest pensioners but he acknowledged that European creditors would also have to agree to significant additional financing and to some debt relief sufficient to maintain debt sustainability through a long rescheduling of debt payments at low interest rates.
Greece’s leftist anti-austerity government led by Greek Prime Minister Alexis Tsipras has refused to embrace with the requested reforms that are needed for Greece to receive its final €7.2 billion bailout disbursement of its massive €240 billion bailout package that would allow the cash strapped country to pay €1.6 billion that it owes the IMF by the end of June and another €6.7 billion due to the European Central Bank (ECB) in July and August.
Greece’s largest creditor nation, Germany, is increasingly growing less patient with Athens.
According to latest German polls, more Germans approve of Greece leaving the 19 member euro area currency bloc.
In a recent poll taken from German state broadcaster ZDF program “Political Barometer”, 51 percent of polled Germans were in support of Greece exiting the euro compared to 41 percent of Germans that said the country should remain in the currency union.
At the beginning of 2016, just before Greece’s leftist party Syriza came to power, 55 percent of polled Germans were in support of Greece remaining in the euro area.
On Tuesday and Wednesday Fed Committee members will be convening in Washington D.C. for the Fed’s June meeting.
Fed committee members could decide to raise interest rates at their June meeting this week, although it is not likely to occur until later this year.
Monday- Empire Manufacturing (June), Industrial Production (May), Capacity Utilization (May), NAHB Housing Index (June)
Tuesday-Housing Starts and Building Permits (May)
Wednesday-Fed Reserve Rate decision, MBA Mortgage Index (6/13), Crude Inventories (6/13)
Thursday- Initial and Continuing Jobless Claims, CPI and core CPI (May), Philadelphia Fed, Leading Indicators (May), Natural Gas Inventories
Euro Group Finance Ministers will be convening on Thursday as well
-John Schweitzer firstname.lastname@example.org