Reply to post: Re: you mean

Re: you mean

But if only it had done what the IMF typically advises. Slashed pensions, tax cuts for billionaires, privatised health, sold all its public services to US corporations and abandoned any anti poverty programs it would have been fine.

People are routinely unfair to the IMF. The World Bank have been far too guilty of pushing privatisation and cuts in government spending in order for countries to get approved for development programs, when those cuts/changes weren't necessary to the program. Not that I'm against privatisation, but with the World Bank it had become ideological, and there should be a large amount of decision left up to the governments in question, even if they're making mistakes - they have a legitimate right to do so.

But the IMF are different. The IMF are mostly brought in when things are fucked up. And in that case countries often have no other source of borrowing. So terms should be stringent. But also, the IMF only have a limited pool of money aviablable. So the point about an IMF program is that it's only supposed to tide a governent over long enough to get through the immediate crisis - until it's able to borrow on the international markets again, and can pay the IMF back.

One of the global controversies about the IMF loan is that it was a massive loan. The biggest the IMF had ever given by far. And given to a rich, developed country. Which means that money from many very poor, developing countries was being risked to bail out Greece in order to protect its government spending on benefits that those much poorer countries couldn't afford to give to their citizens. Had the IMF not been run by a French politician, it's not certain that the loan would have been approved. Christine Lagarde (the IMF managing director) did successfully argue that the risk of the Euro collapsing was systemic and could cause a global depression. And she did have a fair point there. But still, countries like China and Nigeria were pointing out that they were poorer than Greece and all the other countries in the Eurozone are also richer than them, so why couldn't the Eurozone bail Greece out.

Also, on the harshness of the cuts, they were also not totally IMF policy. The harshness was required because IMF rules require that a country have a sustainable deficit, and that an IMF loan is only allowed if this is the case. Given Greece's accelarating deficit this meant making harsher cuts than the IMF would recommend. In fact what happened was that Lagarde overruled the economics department of the IMF in order to allow the first bail-out, as there wasn't enough total money coming from the IMF and the EU to make it sustainable, and so they needed extra cuts in spending to make the numbers add up. But of course that meant the Greek economy would shrink more than predicted, so they had to fudge the forecasts.

The first bail-out of course failed. Cutting Greek government spending by 10% in one year caused the economy to shrink by 13%, instead of the predicted 7% (figures from memory warning). But the important thing was the economic contraction being larger than the government cuts, which meant that more would be needed to make the debt "sustainable" to allow the fiction to continue for the next two bail-outs. Which ended after 3 years with the economy having contracted by 30% (a world record, so congratulations guys!) and government spending having been cut by 25%.

This was against the recommendation of the IMF Economics Department and done basically by the Eurozone in connivance with the French political appointee at the helm of the IMF.

The IMF had an internal report into the failures of the Greek bailout and have at least apologised. The Eurozone, not so much.