European Economic and Monetary Affairs Commissioner Olli Rehn put a stop to Greece’s expectations of a revision of the austerity program due to IMF’s miscalculations of fiscal multipliers. In a letter to ECOFIN ministers snet on 13. February 2013, Rehn wrote among others ““Recent studies on fiscal multipliers are of particularly limited use when it comes to the case of Greece,” suggesting that there were other factors that affected the Greek program, factors like “persistent uncertainty and implementation problem at the start of the program that blocked the “confidence effects.”
Rehn also suggested the IMF’s analysis was not broad enough and that several other factors came into play, such as a general economic downturn in the eurozone.
“The timing of Rehn’s intervention suggests that he was unhappy with Greek Finance Minister Yannis Stournaras bringing up the issue at the ECOFIN and with the IMF for raising an issue that he deems irrelevant to the immediate challenges facing Greece and the eurozone.” (ekathimerini)
The move of Olli Rehn is considered unusual and a intervention showing very clearly the intentions of Greece’s lenders.
The letter was also copied to European Central Bank President Mario Draghi, European Stability Mechanism chief Klaus Regling and the IMF, which triggered the debate by admitting that it underestimated the impact Greece’s adjustment program would have on its economic output by as much as three times.
Page One of Rehn’s letter via Proto Thema