06-15-2015, 03:17 AM
Virtually everyone now agrees that pushing Greece to pay its private creditors was a bad idea. The required fiscal austerity was simply too great, causing the economy to collapse. The IMF acknowledged the error in a 2013 report on Greece. In a recent staff paper, the fund said that when a crisis threatens to spread, it should seek a collective global solution rather than forcing the distressed economy to bear the entire burden. The IMF’s chief economist, Olivier Blanchard, has warned that more austerity will crush growth. Oddly, the IMF’s proposed way forward for Greece remains unchanged: Borrow more money (this time from the European authorities) to repay one group of creditors (the IMF) and stay focused on austerity. The fund's latest projections assume that the government's budget surplus (other than interest payments) will reach 4.5 percent of GDP, a level of belt-tightening that few governments have ever sustained for any significant period of time.
The IMF's big Greek mistake | Ashoka Mody at Bruegel.org
If Batista’s latest pronouncements are to believed — and for the moment there’s been no official denial from his Washington-based employer — they could represent a complete departure from traditional IMF policy on Greece. While he urged the new Greek authorities to “continue working with the Fund’s technical staff,” he also invited much closer collaboration with the Fund’s “political authorities.” When representatives of the Greek government come to Washington, he said, they should “present their view directly to the executive director of the Fund” and “perhaps even invite executive directors of the fund to visit Greece.”
Is the IMF About to Make Greece an Offer It Can’t Refuse? | Wolf Street
Following Germany's lead, IMF officials have placed their faith in “structural reforms” -- changes in labor and other markets that are supposed to improve the Greek economy's longer-term growth potential. They should know better. The fund's latest World Economic Outlook throws cold water on the notion that such reforms will address the Greek debt problem in a reliable and timely manner. The most valuable measures encourage research and development and help spur high-technology sectors. All this is to the good, but such gains are irrelevant for the next five years. The priority must be to prevent Greece from sinking deeper into a debt-deflation spiral. Unfortunately, some reforms will actually accelerate the spiral by weakening demand.
The IMF's big Greek mistake | Ashoka Mody at Bruegel.org
The International Monetary Fund "torpedoed" a recent attempt by European Commission chief Jean-Claude Juncker to offer Athens a compromise proposal in tortuous debt talks, a German daily reported. Citing a "negotiator" as its source, the Frankfurter Allgemeine Zeitung said there had been "tensions" between the EU Commission and the IMF in recent days as Greece and its creditors race against the clock to come up with a debt deal to avert a catastrophic default by Athens. The compromise that Juncker wanted to present to Greek Prime Minister Alexis Tsipras would have allowed Athens to postpone some 400 million euros in pension cuts in return for making similar savings on military spending, the newspaper said in its Sunday edition. But the IMF was opposed to any such "bartering", the source was quoted as saying in the report.
First, despite the protestations of the Greeks that the demand for primary surpluses of 4 1/2 percent of GDP in the medium-term is extraordinary, until very recently the IMF “demands” on Italy were even more extravagant. And Ireland, also briefly, joined Greece’s elevated ranks in the October 2014 WEO. The point is, however, not that demands on Greece were or are “in line”, but that the entire edifice of IMFproposed macro-policies for the eurozone, as summarized in these numbers for peripheral primary surpluses, was (and is?) all-but-unthinkable.