Greece misses IMF payment in warning shot as showdown with Europe escalates

Greece is to take the drastic step of skipping a €300m payment to the International Monetary Fund on Friday, invoking an obscure mechanism in abeyance since the 1970s to bundle all debts due in June and pay them at the end of the month. It is the first time that a developed country has ever missed a payment to the IMF since the creation of the Bretton Woods institutions at the end of the Second World War. The news broke after the Athens stock exchange had closed but a bloodbath is feared when the bourse opens on Friday. Yields on two-year Greek bonds spiked 63 basis points to 21.8pc amid mounting fears of a deposit run on Greek banks and the imposition of capital controls as soon as this weekend.

Iceland got away with thumbing their nose at the IMF a decade or so ago and is now doing quite nicely.

Of course, they don't need an ongoing revenue stream of other people's money since they generate most of their own wealth. They also do not allow themselves to be a destination or even a way station for refugees with exploitive intentions.

Diversity is decidedly not their strength as the population is 93% Icelandic. The only other ethnic group to break 1% is the Polish at 3.1%.

The problem in Greece was brought to the fore when a clerk in Athens saw a satellite photo of Athens and noticed all the backyard swimming pools. You have to pay a tax to build a swimming pool in Athens and no one was paying that tax.

So, the people of Athens had the money to put in private swimming pools, but didn’t want to pay the taxes to put in that pool.

Now, they are having a tax crisis.

Confiscate their swimming pools and sell them to pay off Greece’s debts.

Opa!Opa!Opa! Let’s go for a swim! Opa!Opa!Opa!

Getting Greeks to pay taxes is but one challenge. They are also a petri dish for unfunded pensions and state paid medical care. Even if Greeks stopped their habitual tax evasion, there is only so much wealth in the country. Turning over that wealth to the Greek government would simply spark a new spending frenzy, blowing away that cash and leaving the country with no future resources to ‘tap.’

Perhaps we need to change the names slightly in the old poem...

‘This little PIIGSy went to market,
This little PIIGSy stayed home,
This little PIIGSy had roast beef,
This little PIIGSy had none,
And this little PIIGSy went wee wee wee all the way home!’

Italy and Spain are watching. And Greece is but a drop in the bucket compared to them. The IMF (and the EU) can't afford to buckle to Greece.

Much as it is political suicide (see previous regime), Greece's only real long term answer aren't loans from China and Russia (much as they like the banter that these are realistic options) but to actually follow the recommendations of the IMF, cut pensions, cut the medical system, raise the only taxes that Greeks do bother to pay and stop making promises they'll never be able to keep.

Because at the end of the day, Greece won't be getting fantastic loans from China or Russia - Russia's having enough of a time paying their own bills, and China would rather continue buying countries that actually have resources and a population that values hard work.

The only question, really, at this point, is if there is any conservative media left on the planet who'll rightly say that yet again, the liberal policies have failed. That eventually you run out of other people's money to spend.

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