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IMF to Greece: Oops, Our Bad!


The IMF on Thursday officially released a classified internal report on the Greek bailout after its contents were leaked to the WSJ. The report admits that the IMF misjudged “by a large margin” the sustainability of Greek debt. It also says that Greece’s debt problems were so bad that the IMF had to fudge the numbers so that it could even participate in the bailout, noting, “in retrospect, the country failed on three of its four criteria to qualify for aid.”

As predicted, Greece has consistently failed to meet the Troika’s debt projections as austerity measure has kicked in, and it now may need even more public sector debt relief as early this fall. The IMF is now claiming that it predicted this from the beginning but decided to remain silent for fear that a negative forecast would kill the bailout politically:

[The IMF report] described the rescue as a “holding operation” that “gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy.” […]

While criticizing the delay in restructuring Greece’s debt load, the fund conceded that cutting it before 2012 was “politically difficult” because of resistance from some euro-area countries, whose banks held too much Greek government debt.

Greeks reacted to the IMF’s mea culpa with a mixture of anger and vindication. Reuters quoted 59-year old garbage collector Apostolos Trikalinos reacting to the news: “Really? Thanks for letting us know but we can’t forgive you…. Let’s not fool ourselves. They’ll never give us anything back. I’m sorry for all the people who killed themselves because of austerity. How are we going to bring them back? How?”

Greeks have been angry at the IMF and the Eurozone’s leaders from the very beginning, and this anger has been behind many of the recent riots and the rise of the radical right. These new revelations will only make the Greeks more angry, as well as further widen the gap between the Eurozone core and periphery.

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  • Ghenghis john

    The Greek position: if you don’t keep loaning us money to spend irresponsibly, we will consider this “austerity” and eventually default, destroying the banking system.

    If the Greek argument sounds foreign, consider that it is precisely the same argument Obama used for raising the debt ceiling.

  • Pete

    The Greeks (and others) seem to think that they are entitled to the same lifestyle as the producer nations just because they call themselves “Europeans.”

    They can’t get it through their heads that there is a direct correlation between wealth and the effort to produce it.

    Could the Greeks actually believe that make-work government jobs many of them held were actually contributing to the wealth making capacity of their country????

  • Andrew Allison

    I’m confused. The IMF confesses that things were worse than it appeared, and the Greeks are crying foul?

  • ljgude

    It is indeed confusing, probably because the Greek perspective is hard to understand from America where the correlation between effort and wealth is everywhere and always perfect. Er…well, at least the ways the rules determining who wins and who loses are bent in a quite different ways in these two monuments to democracy.

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