I already told you yesterday: that the war between Greece’s lenders was already on underway and that heavy bomb shelling with poison mortar and blame-game was just a matter of time. Even if it sounds unbelievable, this time the target is not Greece but the International Monetary Fund that is under fire by the front of the European allies and by former IMF board members.
The IMF has come under fire for failing in its duty of care towards Greece by pushing self-defeating austerity measures on the battered economy.
“The Washington-based fund was told it should have eased up on the spending cuts and tax hikes, pushed for an earlier debt restructuring and paid more “attention” to the political costs of its punishing policies during its five-year involvement in Greece.
The recommendations came from a former deputy director of IMF’s Independent Evaluation Office (IEO) David Goldsbrough.The IEO is an independent watchdog tasked with scrutinising the fund’s activities. Mr Goldsbrough worked at the body until 2006.
His suggestions are set to embolden critics of the IMF’s handling of the Greek crisis. They follow previous admissions from the fund that it has over-stated the benefits of imposing excessive austerity on successive Greek governments.
The suggestions from the former watchdog chief come as reports suggest the IMF is still poised to pull out of Greece’s third international rescue in five years over the sensitive issue of debt relief.
The fund is pushing for a restructuring of at least €100bn of Greece’s debt pile, according to a report in Germany’s Rheinische Post.
Such bold measures to extend maturities and reduce interest payments are set to be rejected by its European partners, who are unwilling to impose massive losses on their taxpayers.”
Accounts from 2010 show the IMF was railroaded into a Greek rescue programme on the insistence of European authorities, vetoing the objections of its own board members from the developing world. (full article The Telegraph – )
“Structural Adjustment Programmes” have always been the IMF’s game. It entails devaluing the currency in order to have exports become cheaper (but making imports more expensive). In the case of the Euro this tool could not be used so therefore Greece had to ‘internally devalue’ (austerity in the form of salary cuts). It also entails raising interest rates in order to fight inflation (could also not be used since the ECB sets interest rates). However, this makes borrowing money expensive for local businesses. So therefore more austerity in order to curb ‘collective demand’ that drives inflation (but what demand anyway). And it entails economizing on government expenditures such as pensions, social security, salaries, etc. So austerity, austerity and more austerity. All the above killed off people’s spending power, SME and the wider economy.
They apply this model blindly. Usually they applied it in Latin America, Africa or Asia. Along with the Worldbank it is part of the Washington consensus.
This year they called for debt restructuring. In fact, they should have called that in 2012. They also knew back then that austerity would not work and that debt restructuring (along with reform) is necessary. But creditors (that made bad investments in Greece -so called ‘irresponsible lenders’) wanted it all back. And IMF functions as a debt collector. As a ‘lender of last resort’ they give you enough money to hold out for a month or two. You want more? Apply our Structural Adjustment Programme. They are a debt collector for loan sharks*
*nowhere I want to imply you should borrow irresponsibly. Every government has a duty to apply monetary and fiscal discipline but lenders that make bad investments should not be bailed out by tax payers (as in the bailouts of Greece. The EU taxpayers are on the hook for that in case Greece defaults. That is the reason why Greece has to stay in the Euro or else you’d have a lot of angry Europeans once they realize what kind of game has been played with their and their children’s money).