Former International Monetary Fund (IMF) chief Dominique Strauss-Kahn broke his silence on the Greek debt crisis on Saturday, calling for Athens’ creditors to accept a temporary suspension of payments.
Strauss-Kahn, the disgraced French politician who was felled as IMF leader by a New York chambermaid’s accusations of sexual assault in 2011, was head of the international lender at the beginning of the debt crisis.
The former French finance minister made the suggestion in a three-page declaration titled “On learning from one’s mistakes”, posted on his Twitter page Saturday as Greece teetered on the brink of default.
— DSK (@dstrausskahn) June 27, 2015
“My proposal is the following: Greece should get no more new financing from the EU or the IMF but it should get a generous maturity extension and significant nominal debt reduction from the official sector,” Strauss-Kahn wrote.
European countries are still opposed to such a reduction of the debts they are currently owed by Athens.
But Strauss-Kahn argued: “Providing more assistance to simply repay existing official creditors is simply inane.” Strauss-Kahn, who took part in early discussions on the risks associated with Greece’s huge debts from 2010, said his proposal would “free Greece from any of its obligations to the official sector in the coming two years”.
“Having no access to markets and receiving no new financing from the EU or the IMF it will have to balance its budget alone,” Strauss-Kahn said, warning the Greeks would “need to make tough fiscal choices but they would make them on their own”.
“To achieve this, the government would have to start collecting taxes and confronting the oligarchy, the vested interests and the deep state that are sapping its formidable potential,” he added.
“If this proves successful, Greece should then become eligible for gradual nominal debt write downs” conditional on reforms, he went on, on a similar model to that used by the IMF with “a number of developing countries”.
He added that “only the 10 billion (euros) earmarked for banking sector recapitalization should be returned to Greece” to allow the European Central Bank to pursue its emergency assistance program.
“This is not guaranteed to work,” Strauss-Kahn stressed, but he said it was “worth trying because the alternatives are worse”.
“Prolonging the current failed program, extend(ing) economic hardship beyond reason and prolong(ing) the agony and the divisive tensions between debtors and creditors would be disastrous.”
He concluded: “These are mistakes that Europe has experienced too many times in its history to repeat them.”