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Following the admittance by the IMF to serious wrongdoings in a leaked internal Report, over the handling by the Troika of the first bailout package for Greece back in 2010, the engaged blame game among Troika players, demonstrates how dysfunctional the institutional setting of the Troika is.



In assessing the first austerity package imposed on Greece by the Troika, the IMF has confessed to wrong growth projections, flawed austerity impact measures and even to internal rules bending to enable the granting of financial aid to Greece.



The Report refers to flawed growth forecasts. The IMF had expected a 5.5% decline in Greek GDP whilst in reality it dropped by 17%! Greece entered its sixth consecutive year of recession and unemployment in 2013 has soared to a staggering 27%.



The imposed austerity measures are presented as a necessary evil. The Report however sheds light over the fact that the IMF had initially proposed a quick restructuring of Greek debt complemented by countering measures to avoid negative impacts on European banks. Instead of a rapid restructuring of the Greek debt, the country was lent monies to repay interests on its loans to banks and hedge funds, with significantly high interest rates, whilst he Greek population suffered.



The IMF now conceded that early debt-restructuring would have allowed easing the burden of adjustment and most importantly would have enabled the losses to be shared more equally between banks, bond-holders and creditors and not the losses being suffered primarily by the Greek population. The IMF Report blames EU Commission and ECB for not agreeing to such an early bailout and at the same time criticises them for not holding enough competence in crisis-management within a monetary union.



The IMF ‘Mea Culpa’ comes in far too late. The lack of official acknowledgement of the failures by the Troika only adds fuel to the fire which has plunged Greece in economic recession and a perpetuating downward spiral of structural adjustments. The Greek population suffered and continues to do so. It is time for the Euro-zone leaders to draw out the consequences of this assessment and draw back its austerity policy and promote fiscal stimulus. The reactions following the IMF declarations illustrate once more that the Troika lacks democratic legitimacy and that its institutional arrangements are weak to say the least.



You can access the IMF Report in the Related Files tab.