IMF rapped for fail­ures

Re­port: Fund did not heed staff on Greek debt re­lief, gave in to po­lit­i­cal pres­sure

Kathimerini English - - Front Page -

The In­ter­na­tion­alMone­tary Fund failed to de­mand debt re­lief as part of Greece’s ini­tial bailout in 2010 even though many IMF of­fi­cials be­lieved this was cru­cial for the pro­gram’s suc­cess, ac­cord­ing to an in­ter­nal probe into the IMF’s han­dling of Euro­pean bailouts pub­lished yes­ter­day, which found that the Fund bent its own rules and gave in to po­lit­i­cal pres­sure. “Crit­i­cally, there was no rig­or­ous at­tempt to ar­tic­u­late a con­vinc­ing path to restor­ing debt sus­tain­abil­ity in Greece, other than a pro­gram of of­fi­cial fi­nanc­ing, fis­cal ad­just­ment and struc­tural re­forms,” the IMF’s In­ter­nal Eval­u­a­tion Of­fice (IEO) said in its re­port, ob­tained by Kathimerini and first pub­lished ear­lier this month.

The re­port said the Fund came un­der “pres­sure” to agree to the Greek bailout even though se­nior staff mem­bers did not be­lieve the debt was sus­tain­able. It noted that then IMF manag­ing di­rec­tor Do­minique Strauss-Kahn de­cided “to go along with the de­ci­sion al­ready reached by Euro­pean pol­i­cy­mak­ers and take a chance” that sta­bil­ity could be re­stored in Greece with­out prior debt re­struc­tur­ing.

In com­par­i­son, the IEO found, the Fund’s bailouts of Ire­land and Por­tu­gal were much more ef­fi­cient, boosted by strong “na­tional own­er­ship” of the pro­grams and en­force­ment of re­forms.

Ac­cord­ing to the IEO, the IMF’s rules on grant­ing ex­cep­tional access, which re­quire board in­volve­ment from the out­set, were “fol­lowed only in a per­func­tory man­ner.” It added that amend­ments were made that departed from the Fund’s usual process, al­low­ing a “sys­temic ex­emp­tion” that al­lowed the Greek bailout to pro­ceed.

Re­spond­ing to the find­ings of the re­port, Manag­ing Di­rec­tor Chris­tine La­garde said she be­lieved the IEO did not ad­e­quately prove that the IMF’s tech­ni­cal anal­y­sis came un­der un­due po­lit­i­cal pres­sure. The IMF’s in­volve­ment in the pro­grams for Greece, Por­tu­gal and Ire­land was a “qual­i­fied suc­cess,” she said. “Greece, how­ever, was unique,” she added. “While ini­tial eco­nomic tar­gets proved overly am­bi­tious, the pro­gram was be­set by re­cur­rent po­lit­i­cal crises, push­back from vested in­ter­ests and se­vere im­ple­men­ta­tion prob­lems that led to a much deeper-than-ex­pected out­put con­trac­tion.”

The IMF has yet to de­cide whether to join Greece’s third bailout, call­ing for debt re­lief.

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