An internal IMF report shows the IMF repeatedly succumbed to political pressure, ignored its own rules, and kept many executive board members in the dark about the state of affairs.
Please consider IMF Swayed by Politics During Eurozone Crisis, Say Inspectors.
The International Monetary Fund repeatedly succumbed to political pressure from European governments during the eurozone debt crisis, according a damning internal report on bailout strategy that will fuel debate over whether it should continue to fund Greece.
In-house inspectors highlighted a litany of flaws in the IMF’s “uneven” response, prompting calls for greater clarity over the fund’s rescue strategy for eurozone countries.
Christine Lagarde, the IMF’s managing director since 2011, backed some of the inspectors’ recommendations for improving internal procedures but dismissed calls from the independent evaluation office (IEO) to fortify the fund’s defences against political interference.
T the report is likely to fan suspicions of some emerging market IMF shareholders and some of its staff that it repeatedly bent its own rules to help out the eurozone.
“It highlights the concerns of many — both inside and outside the fund – that the fund’s treatment of developing and emerging market economies is quite different from its treatment of advanced economies,” said Eswar Prasad, economics professor at Cornell University and former IMF official.
“Political factors seemed to play a bigger role than pure technical considerations in matters involving advanced economies.”
The inspectors said the troika arrangement — in which the IMF worked alongside the European Commission and European Central Bank — potentially subjected the technical judgment of IMF staff “to political pressure” from an early stage.
“The European Commission, in the area of emergency crisis lending, acted as the agent of the eurogroup, which in turn represented member states and decided whether to provide assistance.
“Interviews and some internal documents suggest that political feasibility in creditor countries was an important consideration for [European Commission] staff and that IMF staff occasionally felt pressured to accept a less-than-ideal outcome.
The inspectors said the IMF executive board, responsible for the fund’s day-to-day business, was in the dark on sensitive policy questions for Greece and Ireland, which also received a bailout in 2010.
Some executive board members, who usually meet several times each week, learned more from the press throughout the crisis period than from informal board meetings.
The board approved the first Greek deal in May 2010 “without seeking pre-emptive debt restructuring, even though its sovereign debt was not deemed sustainable with a high probability”.
The fiscal troubles of Greece remain unresolved, fanning concern about regional instability at a time of upheaval in Turkey. In recent days the US has pressed the country’s European creditors to allow a debt restructuring to restore order in its finances.
The inspectors, led by Japanese academic Shinji Takagi, found the IMF had considered the prospect of lending to a eurozone country to be unlikely and had never set out how such programmes might be designed.
Measures of Success
The fund’s involvement in eurozone programmes had been a “qualified success” in the face of unprecedented systemic challenge, Ms Lagarde said.
Yes indeed. The bailout was a “qualified success” for Germany and the creditors (for now), but an unmitigated disaster for Greece.
Mike “Mish” Shedlock
“Yes indeed. The bailout was a “qualified success” for Germany and the creditors (for now), but an unmitigated disaster for Greece.”
Would the reverse have been better, Greece winning at the expense of Germany? Or is there some way that both Germany and Greece could win with no losers?
Christian LaGarde (and Clinton) is a politician = lie, cheat and steal, as ling as you can feed at the trough of the “one rule for me, and fuck you” mentality of the “status quo”.
Tme for a change – throw out the b/s and use some common sense, not economists are corrupt politicians that only want to feed at the taxpayers trugh.
The IMF has always been an instrument to pillage countries in economic distress for the usurious benefit of Zioglobalist bankers and corporatists in the developed countries. Bending operation guidelines/ unethical behavior would be the rule rather than the exception.
Money is used to buy compliance, whereas debt is used to force it. Banks “create” money at no real “cost” to themselves, and then proceed to enrich themselves directly, or use it to indebt others with the knowledge that they can’t pay it back as a means to hold great power over them. Ultimately people will push back and result in violence and even war. In any case, the bankers only concern in regard to fairness is what they perceive is fair for them.
Greece showed huge current account deficits from 2000 until now. In 2008 and 2009 this deficit reached 15% of GDP. Therefore the 100% GDP figure in the graphic above is fake. Without credit financing 85% would be the real number. The 10% drop to 75% is owed to the endless strikes and general strikes that crippled the country in the last 8 years. Greece should have left the Euro zone and the EU as well. It is a 3rd world country, where cheating and tax avoiding is a national pastime. Look at Spain. Despite their terrible real estate bust their already on par with pre-crisis levels and going strong..
It was only a qualified success for bankers. Both Greek and German bankers were bailed out. Both Greek and German people continue to go slowly backward as printing confiscates their goods directly, and misallocates capital to create a future banana republic.
The public needs more hackers who on a weekly basis deliver the transparency we demand.
Diogenes of Sinope said:
Edward Snowden understands this well.
Too bad he was the last honest man in Babylon.
Having reached my charming logo, I have been unable to transmit 3 msgs, probably due to computeritis.
I am an expert on la France, though, having survived 5 years in Paris, France, en bicyclette (we all know where Paris, Texas is) & can recommend Canada’s superb series on Louis XIV which may be available riddled with commercials on American Gutter TV.
The Sun King had special license for Drawing & Quartering suspects plus endless skirtlifting. Catherine the Great & her lover Batinka (who installed the entire Crimea 80 years before “Old Hickory”, when told Congress had assigned a reservation in Rattlesnake Paradise Oklahoma to the Cherokees unceremoniously cheated of their ancestral lands, shouted, “Get them Goddam Indians outta there!” Please inform Kerry & Mrs WC of Manifest Destiny, reminding them of The Gipper’s promise to Gorby not to move 1 inch farther eastwards albeit not to bomb the wrong side & help the wrong side while alienating 80% of the planet ). Catherine from the Sächsische Anhalt, the size of a golf course, & Batinka (Prince Potemkin), named after my cat, despised the French who never showed up as promised…
Before your time came one Edith Cresson who discounted the Japanese work ethic as “des fourmis” (ants) & all graduates of English Public Schools as homosexuals. Then there was Jacques Attali, head of the EBRD, who was bounced for spending £300,000 for decorating the HQ.
“Enarques” bear some consideration, graduates of l’Ecole Normal d’Administration, including that Popinjay Hollande, top graduates ending up in the Inspectorat des Finances, floating in & out of banks at their own discretion as in the case of the BFCE where my first boss in Wall St got a job only after the blessing of the Chambre des Deputes, telling me an Enarque had proposed to move the bank to Eurodisney for a few years, then back to Bd Haussman… The “méritocratie” was in fact Napoleon’s invention & answer to the aristocratie who had the country in a stranglehold. A friend in Paris told me her son had just acceded, pointing out that admission depended upon good grades but even more on “bonne famille” = The French Revolution had no effect. Every village in France has an Avenue Général Leclerc, celebrating his liberation of Paris with de Gaulle announcing at le Rond point des Champs Elysées “Français, Françaises you have been liberated by French soldiers” (profiled by the US 28th Infantry or Leclerc would have been torn to bits by one of the Wehrmacht’s brave & smart 97 mechanised divisions). My friend Norm Schwarzkopf said French soldiers were as essential as an accordianist at a picnic… Ike had an unexplained liking for de Gaulle. In fact the famous French Resistance was only a fig leaf for all the collaboration, said Martin Amis. As economists go, Ike whose sole diploma was a BSc in engineering from West Point beat them all (see David Stockman’s THE GREAT DEFORMATION) whereas ask any Belgian about winter in the Ardennes. He will tell you, also about the terrain of the Hautes Fagnes for tanks. Montgomery was right to want to give Lt Gen Sir Oliver Leese enough gas to continue only 60 miles east to the Rhine, where the sole obstacle was an aged Wehrmacht battalion that wanted to surrender. Because of Ike’s Sound Money Policy enforced by William McChesney Martin & Bill Simon, oil was $1/BBL & National debt $5 billion when I graduated from West Point in 1958. Later on, Dean Rusk was asked by de Gaulle to remove US soldiers from French soil. “The corpses as well, mon Général?”
So lucky we are that those brilliant French & Italian economists have wormed their ways into the powerful control orgies – everything beginning with an “E”: ECB, EBA, EFSF, etc.- making Basil, not Palermo, the crime capital of Europe, in fact, the world, having cooked the books since the 13th century.. Leave them there as Brexit blooms into a new Hanseatic League for GB, D, NL, CZ & the Baltics while termites like CL continue the appropriation of valuable infrastructure of poor countries unable to afford loans cooked up between CL & her army of economists who generate plenty of publicity with their erroneous forecasts, having evolved by the Peter Principle from unsuccessfully fighting off the London Gold Pool after being appointed to supervise the Modified Gold Standard at Bretton Woods.
As someone in that Vermittlungsburo “Marriage Bureau”, the Comical Market told me, having expanded from 10,000 when I arrived in 1970 to its present 30,000+, trundling their little black carry-ons on missions to discuss new banana laws – “But the Scottish Office is bigger…” A tour of Wang Laboratories, which I saved from bankruptcy (Dr Wang invented the magnetic core replacing vacuum tubes in computers & spent the rest of his life suing IBM) with the bright General Manager, George Fisher, yielded the following: “I could fire half the employees & double production by reducing the gossip…”