The serious disagreements and contradictions between the IMF and the EU are creating obstacles in the negotiations, as well as high risks. While until recently the main argument of the institutions was that the Greek side did not submit complete proposals, now it is clear that proposals have indeed been submitted and that there have been substantial concessions towards the direction of an “honorable compromise.”
The difference of strategy, however, between the institutions is creating obstacles.
The IMF puts its red lines on the reforms, especially on pension and labour reforms, while it has loose lines on the topic of the primary surplus. On the back of the mind of the IMF lies the thought of debt write off, so that this can be rendered sustainable.
On the contrary, the European Commission has red lines on the topic of the primary surplus, and consequently, on the issue of not cutting the debt, and loose lines on tough reforms, such as those regarding pensions and labour relations.
The Europeans want Greece to magically get out of their bankruptcy, pay the mountain of debt while pushing through with austerity and cuts. This has proven impossible for the past 5 years. IMF is more reasonable and understands that there is no way out other than a new debt relief. They are now arguing between themselves, Schaeuble vs Thomsen, with poor Greece on the brink.
In the meantime Varoufakis started „soft” measures for capital control, such as a supratax for all transfers out of the country and for all the money collected in cash from banks/ATMs.
What is unsustainable will not be sustained.