IMF leaders admit they got sums wrong over Greece's rescue
Wednesday 05 June 2013
The International Monetary Fund is reported to be prepared to admit that it got it sums wrong over the damage that its austerity programme would do to the Greek economy and the true scale of the nation's debt.
In a report, which has been passed to the Wall Street Journal, the IMF admits that it made crucial mistakes over Greece.
In particular the IMF said that it had been wrong of senior figures at the organisation, including managing director Christine Lagarde to insist from the early part of the crisis, which began in 2010, that the level of Greek debt was “sustainable” and likely to be repaid in full in a timely fashion.
The document is said to describe the uncertainties around the Greek rescue as “so significant that staff was unable to vouch that public debt was sustainable with a high probability.”
Since this time lenders to Greece have been forced to take a series of 'haircuts' on their debts and a number of bailouts have been organised by the IMF and EU.
The IMF adds that it was too optimistic about the Greek government's prospects for a return to bond markets and the country's political ability to implement the conditions of outside-imposed rescue programs.
In fact, the memo, which is believed to form the basis of report to be released on Thursday at IMF HQ in Washington, states that the IMF may have bent its own rules to make Greece's burgeoning debt seem sustainable and that, in retrospect, the country failed on the IMF criteria to qualify for assistance.
However, the report also stressed that the actions of the IMF bought time to help the EU limit the damage for the rest of the 17-nation euro area of the Greek crisis.
It described the rescue as a “holding operation” that “gave the euro area time to build a firewall to protect other vulnerable members.”
However, The European Commission is not spared of blame in the IMF report. According to the Wall Street Journal the report says the commission “tended to draw up policy positions by consensus, had enjoyed limited success with implementing [fiscal conditions]…and had no experience with crisis management.”
It adds that the commission focused more on “compliance with EU norms than on growth impact” and “wasn't able to contribute much to identifying growth enhancing structural reforms.”
The Greek Finance Ministry and the IMF declined to comment on the report.
But earlier this year Greek Finance Minister Yannis Stournaras did challenge the IMF to explain its economic forecast for the effects of Greek austerity measures.
The report is the most significant in a series of IMF analyses over the past few months that attempt to assess the institution's involvement in the euro-zone financial crisis.
The IMF joined with the European Central Bank and the Commission and the European Central Bank early in the crisis in 2010 to manage Greece's first bailout of €110 billion. The 'troika' as it is called then oversaw a second bailout in 2012, against a backdrop of economic depression and political discord in Greece.
In talks with visiting troika officials in Athens next week, Greece is likely to ask for permission to cut VAT and sales taxes, arguing that an increase in restaurant taxes, for example, has generated less revenue not more.
The emergence of the IMF report will be a further blow to confidence and European stockmarkets which have sunk to their lowest level in six weeks. Although the economic news from the UK was better on Wednesday a host of disappointing numbers from the Eurozone countries sent the FTSE 100 index of leading shares down 2.12 per cent to 6419.31.
Top Gear presenter is no stranger to foot-in-mouth controversy
New essay by JK Rowling went live on Pottermore site this morning
Mike Tyson branded 'superhero' after a surprise good turn
Charlie Sheen could be set to revive his role as a hedonistic womaniser
Review: Mike Leigh's biopic is a rambling, rich character study
Want to ward off (or welcome) trick-or-treaters? Here's how
- 1 'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
- 2 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 If you think Russell Brand’s new book is confused, you should read what his critics have to say about it
- 5 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
Halloween 2014: From the Screaming Man of Pluckley to the 'White Lady' of the Tower of London - Britain's 20 most haunted places
Russian politician says Apple CEO Tim Cook should be 'banned' from country after coming out as gay
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...