Friday, June 13, 2014

Where Is Greece’s IMF Apology?

by Simon Nixon

Wall Street Journal

June 13, 2014

Last week Christine Lagarde made an apology to the U.K. What a shame the International Monetary Fund boss didn’t extend a similar courtesy to Greece this week. No damage was done by the IMF’s crass warning last year that the U.K. government was “playing with fire” by pushing ahead with its deficit-reduction strategy since it turns out the U.K. had already embarked on what has turned out to be a remarkable recovery. But the IMF’s mis-steps in Greece last year had real consequences.

The IMF’s refusal to believe that Greece would achieve a budget surplus before interest costs in 2013 led to a seven-month delay in the disbursement of crucial bailout funds, which in turn delayed the country’s return to the bond markets that has since fueled a revival in confidence and funding. Indeed, had Athens capitulated to IMF demands for further fiscal measures to meet the imaginary deficit, Greece would almost certainly be facing a seventh consecutive year of recession. As things stand, Greece delivered a 0.8% primary surplus last year and new data this week shows it is well ahead of budget for a 1.5% surplus this year.

But even if the IMF couldn’t bring itself to say the S-word, its latest review of Greece’s bailout program published this week shows plenty of signs of contrition. It talks of “significant progress towards rebalancing the economy” and acknowledges that turning the weakest cyclically adjusted fiscal position in the euro area into the strongest in just four years is “an extraordinary achievement by any international comparison”. It says that “structural reforms are progressing, although unevenly,” growth risks could be “tilting to the upside in 2014” and expresses “cautious optimism” for the future.


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