IMF Quits Greek Debt Talks – And It’s About Time

There is a feeling in certain groups that if only you talk long enough, you can always reach agreement. But that is clearly not true. IMF quits Greece talks amid ‘air of unreality’ as deal unravels –

The IMF says neither side of the talks is being realistic. The Greeks are clearly hoping they never have to make good on any promises. The Creditors are dealing with public opinion back home (“and why are we bailing out the Greeks? Again?)

On Thursday, hours after Mr Tsipras held an inconclusive, late-night meeting with his French and German counterparts in Brussels, the IMF finally intervened. It announced it was pulling its technical team out of the talks — a move intended to inject urgency into the negotiations. The gesture arose out of frustration with what one official described as an “air of unreality” around the talks.

In part this is because both sides are stuck with politics. The Greek Syriza party (of Socialists) who came to power stating they would role back the austerity deal won’t budge. Deals that are agreed to one day by Tsipras, are disavowed the next week because they involve hard choices for Greeks. (Higher taxes, lower pensions.) The folks paying for the bailouts (the average citizen of the well-off European Countries) have had enough, and wonder how long it will go on.

With it looking like the talks are dead, the question of “What Next?” comes to mind. But not apparently to the Greek government.

With the ball now squarely in Greece’s court, analysts struggled to predict Mr Tsipras’s next move. George Pagoulatos, an economics professor at Athens business university, doubts the government has a fallback plan in case a deal cannot somehow be revived.

“There’s clearly no desire within the Syriza government to tackle the consequences of a default — let alone a ‘Grexit’,” he said.

Which is surprising really. If you ever take a negotiating class, one of the things they will go over is what happens if negotiations fail? Because they can and do fail. What is your best alternative to a negotiated solution. You need to know this before starting a negotiation, just as much as you need to know your bottom line position. (What is that line in the sand you will not cross?) If you don’t know these things going in, you are going to have a hard time negotiating effectively.

The other thing that someone should have considered is the impact of a failure to reach a solution. Syriza has been saying “everything will be well in just a few more days,” for a few weeks now. Mostly this is to stave off a run on the banks, though partly it may have been wishful thinking.

And of course the run on banks has been going on for some time, but it has been moving in (somewhat) slow motion. Fearful Greek savers pull money from banks and put it in cars |

To protect his savings [a small business man] bought a brand new Mercedes-Benz car, then took the advice of a financial consultant and invested the remainder in money market funds based in Luxembourg.

“I didn’t want to sit by and see my hard-earned money disappear in a bail-in,” he said, recalling a banking collapse in Cyprus in 2013, in which the government raised almost €8 billion by taxing bank deposits of more than €100,000 after imposing the eurozone’s first capital controls.

Many other Greeks appear to be taking similar precautions. Even as the economy has been sinking, new car registrations have soared this year as worried Greek depositors seek out alternative havens for their money. They rose 27.9 per cent in April on top of a 47.2 per cent increase in March.

The run (fast walk?) on banks started in January, shortly after Syriza won the election and formed a government.