The IMF is sincerely bad news and I cannot believe reading some of the comments on this forum of people in support of the IMF. The IMF spells extreme misery and suffering is this what you wish for Greece? Is this what you would wish for, for your own country?

A lot of your suggestions make perfect sense, and in the longer run I would agree with many of them. The problem we have now is time. We need to have Greece radically change course before the backdraft hits Spain. My feeling is if we allow things to drift that far, it will be very difficult to recover lost ground.

Basically, I want to emphasise that my argument here isn’t that I don’t want the EU to do the necessary, I simply think the EU is not yet sufficiently prepared to go in and tell Greece what to do, in part because they are one of the EU15 and this makes it more difficult. I simply think it is more practical to get the IMF to do it. You don’t want “good boys” here, you need “nasty people”, with smoothly polished teeth.

It’s like taking a child to the dentist. Maybe they scream when the drill comes out, but ultimately they need the filling.

But I also accept that the IMF has no magic bullet. I do however hope that the IMF is capable of learning from its recent experiences in the East.

One of the key issues for me is the collateral rating issue. Do the ECB say no Greek bonds after the next downgrade (this certainly will cause some chaos, since half Greek bonds are held out of Greece). It would be chaos, but it would be manageable. Or should the ECB keep the lower level criteria – then what happens to Italy, since this rule was made for Italy, and never forget, Italy is also slippin-and-a-slidin steadily into the default danger zone.

The thing is, my view is that the problem of not having the ECB take your bonds does become a serious one, since it will make it much more difficult to sell debt, interest rates rise, GDP falls, nominal GDP falls further, and debt to GDP keeps rising, as a result of which interest rates rise further, and eventually there is no alternative to default. On the other hand, if the ECB say don’t worry, we will take the bonds anyway, then there is little incentive to do anything, as we have seen over the last decade.

Basically, were the IMF managing a programme in Greece, then the ECB could make an exception, and then say to Italy – “you want to be an exception, then go to the IMF first, or better, put your house in order before you need to do so.

Thanks for the tip, and don’t apologise for being pedantic. I am often very pedantic myself.