Ian Traynor and Helena Smith reports in Brussels fights back in Greek crisis blame game Guardian 06/06/2013:
Simon O'Connor, spokesman for Olli Rehn, the commissioner handling the €73bn 2010 bailout, said Brussels "fundamentally disagreed" with the IMF on two of the central points raised by the Washington institution – that Greece's debt should have been restructured at the very outset of the crisis and that the commission failed to do enough about structural reforms in Greece.The neoliberal doctrine of austerity is sacred to Angela Merkel and most of the national elites in the EU.
Early debt restructuring, said O'Connor, could have triggered "systemic contagion" across the eurozone. On structural reforms, he added, "this is plainly wrong and unfounded."
The other Troika partner, ECB President Mario Draghi, also takes Angie's side:
But the IMF's findings were swept aside by the ECB's president Mario Draghi on Thursday afternoon. Draghi told reporters he had not read the report, but was confident that any criticism were based on hindsight.But as Carsten Volkery explains in Streit über Griechenland-Hilfe: Das falsche Spiel des IWF Spiegel Online 06.06.2013, things are so obviously going badly in what all sides recognize is a high-stakes game, it's not surprising that the culprits are seeking to shift blame to each other:
"Often these mea culpas are a mistake of historical projection. You judge things that happen yesterday with today's eyes," said Draghi.
Der offene Streit zwischen den beiden Troika-Partnern zeigt, wie groß auch intern die Unsicherheit der Euro-Retter ist. Die Rezession in Griechenland geht ins sechste Jahr, die Arbeitslosigkeit steigt, und der Schuldenberg wird dieses Jahr voraussichtlich auf 175 Prozent der Wirtschaftsleistung anwachsen. Kein Wunder, dass Zweifel an der Strategie aufkommen.But Volkery also makes two valid points: the IMF actually did agree with the measures, despite their now-admitted doubts at the time, and the IMF is still saying that no other course was politically plausible. The IMF is still trying to have it both ways and, most importantly, it has consistently gone along with the austerity drive. Even in their new report on Greece, IMF Country Report No. 13/154 (June 2013), they say the destructive neoliberal measures need to be pushed even further. Including, deregulation and privatization:
[The open conflict between the two Troika partners {the EU Commission and the IMF} shows great the uncertainly of the euro saviors are internally. The recession in Greece is going into its sixth year, unemployment is growing and the mountain of debt is projected to grown to 175% of the economy's capacity {presumably GDP} this year. No wonder that doubt about the strategy is emerging.]
The key factors include: (i) state ownership and restrictions on use of important assets, which remain underutilized (e.g., because of land zoning restrictions) or subject to monopolies (network utilities); (ii) excessive regulations, with permits, licensing and export-import requirements well inferior to EU best practice; and (iii) barriers to entry into closed professions and new markets, including from excessive bureaucracy, corruption, and opaque tax and labor regulations. These factors have limited competition (including from FDI), kept prices and margins well above the EU average, and preserved an economic model based on small and inefficient enterprises. (p. 14)And weakening unions and pushing wages down further: "The labor market has traditionally suffered from a closed and inflexible system of collective bargaining, very high firing costs (severance payments and redundancy notification periods), a high national minimum wage relative to competitors, and high non-wage labor costs."
And slashing public services that don't directly favor the wealthiest:
Public administration reform, which has not yet started in earnest [!!!] and requires closing inefficient entities and programs and reducing staff in a targeted manner through exits [the IMF apparently considers it impolite to say "throw more people out of jobs," though that's the plain meaning of this], could generate ½ percent of GDP in savings. Savings of 1–1½ percent of GDP might be possible from rationalizing [cutting] education and social spending, which should also be better targeted. But room for other cuts appears limited. After shrinking by 3 1/2 percentage points since 2009, the primary expenditure ratio is now below the EU median. Health spending, public sector wages, and intermediate consumption have all been reduced sharply. (p. 20) [my emphasis]How those last two sentences relate to the claims that public administration reform "has not yet started in earnest" is beyond me. The IMF's capacity for self-reflection on the austerity measures clearly has narrow limits!
This is also lovely, from a neoliberal point of view (bolding in original):
However, Greece also faces social safety net spending needs and a need to in fact reduce its high tax rates, but these will require identifying additional high-quality measures. Some elements of the social safety net are inadequate, particularly in light of the large and unequal distribution of adjustment costs. For instance, the net replacement rate of unemployment benefits is just below the 20th EU percentile (but is in part compensated by higher severance), and social benefits target only half of the poorest 30 percent of the population. The program commits Greece to identify and fill social safety net needs. Meanwhile, tax rate reductions are needed to boost competitiveness. The program targets a reduction in the labor tax wedge (to deliver a fiscal devaluation, in light of earlier VAT increases), while Greece’s high corporate tax rate relative to its regional competitors is also an issue. These safety net and tax reductions will consume a good part of the gains from spending and tax base broadening measures. (p. 20)One shudders to think what an unrepentant IMF would be recommending.
So this is the range of debate between the Very Serious People of Europe on the measures wrecking the European economy and indefinitely prolonging the depression: between those who support austerity but vaguely suggest that maybe they kinda-sorta overestimated the benefits three years ago (IMF), and those who support austerity and don't want to hear any regrets from anybody (Merkel, EU Commission, ECB).
Paul Krugman calls the IMF's Greek Regrets (06/05/2013) "fairly remarkable." But he's not too impressed with their retrospective analysis, which is basically the standard neoliberal justification that Maggie Thatcher famously articulated, known as TINA (There is no alternative). Krugman writes:
What could/should have been done differently? The report more or less acknowledges that the pain would have been less with some major debt forgiveness upfront, but dismisses the notion of a more gradual adjustment on the grounds that the financing wouldn’t have been available. But look: if we’re willing to imagine a world in which the troika was willing to admit in 2010 that major debt forgiveness was necessary, why not also imagine that in this world the ECB was willing from the start to backstop sovereign debt the way it finally began to do years later? I think it's possible to envisage a Greek program that began with a big debt writedown, traded off nasty but not crippling austerity for substantial bridge loans from the ECB, and in which Greece returned to the private market in 2012 or so.This is a 1914 level of leadership failure in Europe, especially in Germany, France and Britain.
OK, it wasn’t going to happen politically, and maybe even if it did the price would have been socially disastrous. But in that case you have to wonder whether it was worth trying to keep Greece in the euro at all. "Grexit" would have been ugly, and will still be ugly if it eventually happens. But compared with what has actually taken place?
Tags: angela merkel, austerity economics, eu, euro, european union, imf, greece
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