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IMF leak shows refugee crisis could force Germany to accept deal

The recent disclosure by Wikileaks of a conversation between three senior directors at the International Monetary Fund (IMF) raised the uncomfortable topic of the Greek debt crisis, which shows few signs of abating. The conversations suggested political tensions in the European Union will get worse, not better.

The transcript of an audio recording made on March 19, 2016, between the head of the IMF’s European arm and the IMF representatives involved in the Greece negotiations, highlights desperation among parts of the troika to wrap up the Greek saga, as well as frustration with Germany’s refusal to consider debt relief.

The conversation between Poul Thomsen, the director of the IMF’s European department, Delia Velculescu, the head of the IMF’s representative mission to Greece, and IMF official Iva Petrova, has led to Greek prime minister Alexis Tsipras contacting Christine Lagarde over its most contentious parts. These relate to a suggestion that an unnamed “event” might force the Greek government into reaching an agreement with creditors.

During the conversation, Velculescu says, “I agree that we need an event, but I don't know what that will be.” While later, Thomsen said, “In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default.”

While the trio’s comments are a sign that the IMF is losing patience with the Greek government, the comments on the institution’s plans for bringing Germany to accept a deal are equally controversial, although they have generated less of a political reaction.

Refugee fears could force Germany to the table

Germany is exposed to approximately €57bn of Greece’s €320bn of debt, giving it a leading position in discussions with the Greek government regarding its outstanding debt pile.

After discussing the desire by the German government to postpone discussions on Greece’s debt until after the Brexit referendum on June 23, Thomsen suggested that the refugee crisis could be used to encourage Germany to take a softer stance towards the Greek government.

Germany and Greece both play pivotal roles in the European Union’s refugee crisis. Germany is keen to seek an arrangement with Greece that would see migrants from the Middle East and North Africa arriving on Greece’s islands held there, before being distributed on a per capita basis among EU member states.

Germany won international admiration last year for its decision to accept more than one million refugees from Syria and the Middle East. However, a wave of sex attacks in Cologne on New Year’s Eve, which were blamed on men of North African and Middle Eastern origin, and Islamic State-linked attacks in Paris and Brussels have led to a surge of support for the anti-EU and anti-immigration party Alternative for Germany (AfD). AfD blames Angela Merkel for destabilising Germany and has taken a hard line on refugees entering the country.

In local elections held at the beginning of March, the AfD won votes from Angela Merkel’s Christian Democrats (CDU) party, becoming the third biggest party in the CDU’s heartland of Baden-Württemberg, despite having only being formed in April 2013.

The transcript reveals the trio of officials suggesting the Greeks use a crisis to force the Germans to agree to a deal.

Thomsen said that, “Another possibility is one that I thought would have happened already and I am surprised that it has not happened, is that, because of the refugee situation, they take a decision… that they want to come to a conclusion. OK?”

While the Greek debt crisis shows few signs of abating, the leaks suggest the fissures threatening to tear the EU apart are widening.

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