IMF’s mea culpa on austerity met with anger, vindication in Greece

In a vindication of those who challenged the harsh austerity conditions, the International Monetary Fund (IMF) issued a report on Wednesday acknowledging that “notable failures” were made in its bailout to Greece. But the admission is too little, too late for many Greeks who have suffered “an economic death spiral” at the hands of the crushing austerity policies dealt by the troika.

The New York Times reports:

The International Monetary Fund released an internal report on Wednesday that sharply criticizes its first bailout program for Greece, the latest in a series of partial mea culpas as the fund reassesses the austerity that it has insisted on for ailing, debt-plagued economies.

The 50-page report, titled “Greece: Ex Post Evaluation of Exceptional Access Under the 2010 Stand-By Arrangement,” acknowledges major mistakes in Greece’s first bailout, which totaled about $143 billion and came into effect in 2010. The fund bent or broke three out of four of its own rules with the lending program, the report concludes. It also seriously underestimated the severity of Greece’s downturn.

Under the weight of such measures – applied across the board and hitting the poorest hardest – the economy, officials in Athens said, was always bound to dive into an economic death spiral.

“There were also notable failures. Market confidence was not restored, the banking system lost 30 percent of its deposits, and the economy encountered a much deeper-than-expected recession with exceptionally high unemployment,” the report stated.

And, Agence France-Presse points out,

The IMF’s mea culpa came in the wake of an earlier admission that the troika’s push for tough austerity to radically reduce Athens’ deficit was based on poor assumptions that have left the country in a protracted recession.

In Athens, according to the Guardian,

officials reacted with barely disguised glee to the report, saying it confirmed that the price exacted for the €110bn (£93bn) emergency package was too high for a country beset by massive debts, tax evasion and a large black economy.”

Under the weight of such measures – applied across the board and hitting the poorest hardest – the economy, they said, was always bound to dive into an economic death spiral.

“For too long they [troika officials] refused to accept that the program was simply off-target by hiding behind our failure to implement structural reforms,” said one insider. “Now that reforms are being applied they’ve had to accept the bitter truth.”

“Let’s not fool ourselves. They’ll never give us anything back. I’m sorry for all the people who killed themselves because of austerity. How are we going to bring them back? How?”Reuters reports that for many Greeks, the IMF’s mea culpa is too little, too late:

Greeks reacted with a mix of vindication and outrage at the International Monetary Fund’s admission it erred in its handling of the country’s bailout, berating an apology that comes too late to salvage an economy and countless lives in ruins.

Anger was palpable on the streets of Athens, where the EU-IMF austerity recipe that the Washington-based fund says it sharply misjudged has left rows of shuttered stores and many scrounging for scraps of food in trash cans.

“Really? Thanks for letting us know but we can’t forgive you,” said Apostolos Trikalinos, a 59-year old garbage collector and a father of two.

“Let’s not fool ourselves. They’ll never give us anything back. I’m sorry for all the people who killed themselves because of austerity. How are we going to bring them back? How?” […]

“It makes it easier for the Greek government to say ‘slow down all on these measures’ that have led to six years of recession and record high unemployment,” said Theodore Couloumbis from the ELIAMEP foreign policy think-tank.

Greece’s unemployment is at 26.8 percent, and suicides have increased 26 percent in the last year.

Mere hours after the IMF’s report, the European Commission shot back and defended the way the Greek bailout was handled.  “We fundamentally disagree” with the IMF report, European Commission spokesman Simon O’Connor said, adding that “the reform program is on track and there are growing signs of stabilization and increasing confidence in Greece.”