July 29, 2012
The International Monetary Fund fought hard and successfully to join the eurozone governments and the European Central Bank when a rescue for Greece was launched more than two long years ago. It has not been a happy experience. The Greek economy has underperformed growth and debt targets and is now enmeshed in a post-election tangle. Unless there is a sharp reduction in the disarray and denial among the fund’s European co-lenders, it is time the IMF handed the reins over to them.
The IMF’s disquiet about Greece has been evident for more than a year. That in itself was a belated recognition of reality: it should have pushed from the outset for a restructuring of privately-held sovereign debt and insisted on a much more realistic view of how much economic growth a battered and sclerotic economy was likely to produce.
Once the first Greek rescue had proved inadequate, the fund was persuaded to sign up to the second version this March only with great misgivings. It must not be bounced into joining in a third – or even continuing to disburse under the current programme – on the basis of yet more hopelessly optimistic debt sustainability projections and more inadequate plans for official financing to fill the gap.