Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
Latest Breaking News
General Discussion
The DU Lounge
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
The IMF’s “Mistakes” On Greece Are Nothing New
By Jérôme Roos
Source: Roarmag.org
Friday, June 14, 2013
Three years since its first bailout, the IMF has finally gathered the courage to admit that it made major mistakes in its handling of the Greek debt crisis. In an official report released last week, the Fund states that, while its basic policy prescriptions were correct, it underestimated the negative effect of austerity on growth and therefore ended up making economic prognoses that were much too optimistic about Greece’s debt sustainability. Where the IMF predicted a contraction of 5.5% of economic output between 2009 and 2012, the Greek economy actually lost 17%, and where the IMF predicted 15% unemployment by 2012, the actual rate was 25%. So much for the supposed neoliberal “success story” of draconian austerity that European leaders have been raving about in their delirious collective debt delusion.
And yet, while these seemingly shocking admissions hit media headlines as if they were some kind of profound revelation, the sad truth is that they actually tell us nothing new. In fact, the Greek Labour Institute and the think tank IOVE made forecasts that were frighteningly close to the actual outcome. The IMF now argues that Greece should have had debt cancellation as early as 2010 or 2011, but claims that this policy response was politically unpalatable to those countries — i.e., Germany, France and the Netherlands — whose banks had a large exposure to Greek debt. Again, this is nothing new: the IMF is merely repeating the exact argument that hundreds of thousands of outraged Greeks made in 2011, when they occupied Syntagma Square to contest a parliamentary vote on the EU/IMF-imposed austerity memorandum. Back then, the protesters were dismissed as fringe extremists. Now even the IMF proves them right.
But there is another — more sinister — way in which the IMF’s belated mea culpa is nothing new. The fact of the matter is that these type of self-critical reports by the Fund have been a permanent feature of its management of international financial crises ever since the 1980s. For some reason, every time a debt crisis strikes, the IMF moves in to impose the same short-sighted bailouts, austerity measures and market reforms — and then, several years later, comes to the conclusion that it made major mistakes in its handling of the crisis. Yet it never changes tack: when the next crisis hits, it simply reproduces the same old script: stabilization, privatization, liberalization. Nothing else will do to satisfy the markets, and so the debtors simply have to bend over backwards to satisfy the orthodox neoliberal prescriptions of structural adjustment.
During the Latin American debt crisis of the 1980s, the Fund also made overly optimistic growth prognoses in a context of austerity. Back then, these predictions also served to legitimate a policy response that narrowly served the interests of the big banks by preventing early debt write-downs. Just as today, the IMF was also forced to admit — in hindsight — that it “failed to foresee” the depth and duration of the crisis. As official IMF historian James Boughton noted in his extensive study of thirty years of IMF crisis management, the Fund suffered from a “lack of foresight [resulting] from optimism in assessing the growth prospects of Latin American countries.” Indeed, its austerity programs “were predicated on forecasts of a rapid resumption of economic growth” that failed to materialize. This led Karen Lissakers, a future IMF executive director, to conclude that “the Fund is acting as enforcer of the banks’ loan contracts.”
And yet, while these seemingly shocking admissions hit media headlines as if they were some kind of profound revelation, the sad truth is that they actually tell us nothing new. In fact, the Greek Labour Institute and the think tank IOVE made forecasts that were frighteningly close to the actual outcome. The IMF now argues that Greece should have had debt cancellation as early as 2010 or 2011, but claims that this policy response was politically unpalatable to those countries — i.e., Germany, France and the Netherlands — whose banks had a large exposure to Greek debt. Again, this is nothing new: the IMF is merely repeating the exact argument that hundreds of thousands of outraged Greeks made in 2011, when they occupied Syntagma Square to contest a parliamentary vote on the EU/IMF-imposed austerity memorandum. Back then, the protesters were dismissed as fringe extremists. Now even the IMF proves them right.
But there is another — more sinister — way in which the IMF’s belated mea culpa is nothing new. The fact of the matter is that these type of self-critical reports by the Fund have been a permanent feature of its management of international financial crises ever since the 1980s. For some reason, every time a debt crisis strikes, the IMF moves in to impose the same short-sighted bailouts, austerity measures and market reforms — and then, several years later, comes to the conclusion that it made major mistakes in its handling of the crisis. Yet it never changes tack: when the next crisis hits, it simply reproduces the same old script: stabilization, privatization, liberalization. Nothing else will do to satisfy the markets, and so the debtors simply have to bend over backwards to satisfy the orthodox neoliberal prescriptions of structural adjustment.
During the Latin American debt crisis of the 1980s, the Fund also made overly optimistic growth prognoses in a context of austerity. Back then, these predictions also served to legitimate a policy response that narrowly served the interests of the big banks by preventing early debt write-downs. Just as today, the IMF was also forced to admit — in hindsight — that it “failed to foresee” the depth and duration of the crisis. As official IMF historian James Boughton noted in his extensive study of thirty years of IMF crisis management, the Fund suffered from a “lack of foresight [resulting] from optimism in assessing the growth prospects of Latin American countries.” Indeed, its austerity programs “were predicated on forecasts of a rapid resumption of economic growth” that failed to materialize. This led Karen Lissakers, a future IMF executive director, to conclude that “the Fund is acting as enforcer of the banks’ loan contracts.”
Full Article: http://www.zcommunications.org/the-imf-s-mistakes-on-greece-are-nothing-new-by-j-r-me-roos
3 replies
= new reply since forum marked as read
= new reply since forum marked as read
