Monday, June 10, 2013

IMF and Greece: Institutional Monstrous Failure

June 9, 2013

In a chapter of their new book, The Body Economic, academics David Stuckler and Sanjay Basu calculate the toll austerity has taken on the health of ordinary Greeks. Their assessment is sobering: an HIV epidemic; medics unable to afford gloves, gowns and wipes, and spiralling suicides. Last week the IMF admitted it had been too sanguine about the devastation austerity would wreak on Greece – and that some of the measures forced on Athens in return for its emergency loans had been wrong. Put bluntly, the social crisis catalogued by Stuckler and Basu needn't have been so devastating, and fewer Greeks need have died.

Looking at the first of the three austerity packages the IMF and Europe imposed on Greece, the report admits that the troika's optimism over how the economy would react to austerity was disastrously wrong. It was forecast that Greece's annual income, its GDP, would by last year be down only 5.5% from its 2009 level; the reality was a drop of more than three times that. Unemployment in 2012 was anticipated to be 15% of the workforce; it turned out to be 25%. Amid epochal crisis, Greeks wouldn't have avoided economic and social dislocation – but the policies thrust on them heightened the suffering. The troika underestimated the impact that cuts and tax rises would have on the economy; it failed to foresee the consequent collapse in business confidence, and the further ruination of the loans extended by Greek banks.


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