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IMF’s Thomsen “suffers from short-time memory loss,” says Tsakalotos

Head of IMF’s Europe department “Poul Thomsen suffers from short-time memory loss,” said Syriza MP and former finance Minister Euclid Tsakalotos. He was commenting on Thomsen’s claims that the Greek government agreed to high primary surpluses targets during the negotiations in the first half of 2015. Greeks accepted the high surplus targets in order to “impress European countries on Greek determination,” Thomsen claimed.

Speaking at the London School of Economics about the Greek crisis and the role of the IMF,  Thomsen admitted that “mistakes were made in the Greek rescue program,” and that they were “too optimistic with their calculations.”

He said that in 2010 they assumed that it would take eight years for Greece to return to pre-crisis levels. “The result was much worse,” Thomsen said. According to European Commission  forecast “Greece will return to pre-crisis levels in 2031” he said stressing that the “IMF adds another 2 to 3 years.”

“So we clearly have a lot of explanations to give,” he added.

He reiterated the permanent IMF position of much too high “pension spending” and the “tax-free threshold.”

“Greece has pensions levels comparable to those of the richest European countries without having the same level of middle-class taxation,” Thomsen claimed.

Regarding the primary surpluses, Poul Thomsen said that the IMF favored lower targets and he accused the former Greek government saying “Greeks aligned themselves with Europeans for greater surpluses in order to impress European countries on Greek determination.”

Here is Tskalotos comments to Thomsen claims:

1. The SYRIZA government had not voluntarily ‘agreed’ to high primary surplus targets but did so under considerable pressure from the lenders and, in spite of the pressure, the targets agreed upon were significantly lower than those agreed by the previous governments.

2. Exceeding the agreed targets was not a choice made by Greek government but the result of repeated miscalculations in the ‘expert’ IMF staff forecasts, which led to the imposition of additional austerity measures.

3. The IMF’s intervention was always assymetrical and its decision not to participate in the programme was taken at the last minute. Right up to the end of the programme it “advised” Greece’s lenders to reduce primary surplus targets and do more to ease Greece’s debt but this pressure was ‘toothless’ in that there was never any threat that this must be done by a specific date to ensure the IMF’s participation.

4. On the contrary, threats to Greece were systematic, as in 2017, with the imposition of a law to reduce pensions and the tax-free allowance, which the SYRIZA government finally managed to avert in 2018.

5. Thomsen’s obsession on lower pensions and lower tax-free allowances harmed the IMF’s scientific prestige. With forecasts for growth and surpluses that were not based on real economic conditions but used as a lever to push for antisocial policies. Even in early 2018, they predicted a 1 pct primary surplus.

6. Finally, at some point the IMF should decide if the high-level narrative for inclusive growth and alleviating disparities is just for show because the pressure exerted by Thomsen’s group in 2015-2018 did anything but serve inclusive growth and bridging disparities.

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