
IMF admits euro problems and apologises for the immolation of Greece - randomname2
http://www.telegraph.co.uk/business/2016/07/28/imf-admits-disastrous-love-affair-with-euro-apologises-for-the-i/
======
yequalsx
What I don't understand about reactions to Greece's profligate borrowing is
that I rarely see criticisms of the lender. Borrowing is a 2 party interaction
and both parties bear responsibility. The so called bailouts of Greece have
been nothing more than bailouts of German and French banks. All the while
putting the suffering on Greeks and not anyone else. The best option for
Greece would have been to leave the EU in 2008.

~~~
golemotron
I'm not sure why Merkel is still in office. She's been behind most of that
policy, along with the current immigration crisis, and the policies that
Brexit was a rebellion against.

Ostensibly, Germany is a democracy, but she's had the chancellorship for 10
years and she uses her position to be the EU's de facto leader. There don't
appear to be term limits.

~~~
georgeecollins
I think because the flaws with the Euro that have been very disadvantageous
for Greece are for the same reason very advantageous for Germany. Germany gets
to have a big account surplus with a relatively devalued currency.

She may be doing the wrong thing for EU, but the right thing for Germany. In
the long run perhaps the right thing for EU is the right thing for Germany,
but I don't think German voters see it that way right now.

------
keithpeter
Yanis Varoufakis wrote _And the weak suffer what they must_ to explain the
impact of austerity policies on Greece. He was (briefly) the finance minister
in one of the Greek governments that had to manage this transfer of debt.

Respectfully suggest reading the above alongside Timothy Geithner's _Stress
Test_ for an alternative approach.

The basic issue now is how do they get the Greek economy (and by extension the
Spanish and Portuguese economies) back into something like stability?

~~~
randomname2
He also commented on this piece at [https://yanisvaroufakis.eu/2016/07/29/the-
imf-confesses-it-i...](https://yanisvaroufakis.eu/2016/07/29/the-imf-
confesses-it-immolated-greece-on-behalf-of-the-eurogroup/)

    
    
        TIME FOR RESIGNATIONS AT THE IMF, THE ECB & THE COMMISSION
        TIME FOR AN APOLOGY TO THE PEOPLE OF GREECE
        TIME  FOR A POLICY U-TURN, BEGINNING WITH IMMEDIATE DEBT RELIEF, THE END OF AUSTERITY & THE CESSATION OF FIRE SALES
        TIME FOR THE RESTORATION OF GREEK DEMOCRACY
    

This week began with a debate in Greek Parliament called by the Official
Opposition (the troika’s main, but not only, domestic cheerleaders) for the
purposes of, eventually, indicting me for daring to counter the troika while
minister of finance in the first six months of 2015. The troika who had staged
a bank run before I moved into the ministry, who had threatened me with bank
closures three days after I assumed the ministry, and who proceeded to close
down our banks, now moved to charge me with… bank closures and capital
controls. Like a common bully, the troika proved immensely keen to blame its
victims, and to violate and vilify anyone who dares resist its thuggery.

My reaction to the troika’s charges, and threat of being pulled up in front of
a judicial inquiry , was simple: “Bring it on!” “I shall face you”, I
challenged them “in any forum you want: in an amphitheatre, a TV station, even
a court room!” In the end, they chickened out and the parliamentary motion was
defeated as some of them (a small party usually fully in troika’s clasps)
strategically voted against.

And then, to complete this week’s drubbing of the troika, the report by the
IMF’s Independent Evaluation Office (IEO) saw the light of day. It is a brutal
assessment, leaving no room for doubt about the vulgar economics and the
gunboat diplomacy employed by the troika. It puts the IMF, the ECB and the
Commission in a tight spot: Either restore a modicum of legitimacy by owning
up and firing the officials most responsible or do nothing, thus turbocharging
the discontent that European citizens feel toward the EU, accelerating the
EU’s deconstruction.

While I was in the ministry, negotiating with such folks, the troika-friendly
(or should I say troika-dependent) press was arguing that I am not fit to
conduct these negotiations because I had dared insinuate that, from 2010 to
2014, the IMF, the ECB and the Commission had been fiscally waterboarding
Greece, causing an unnecessary Great Depression as a result of their thuggish
imposition of macroeconomically incompetent policies. The establishment press
were claiming that a finance minister of a small, bankrupt nation which is
being waterboarded by the high and mighty troika functionaries cannot afford
to say, in public or in private, that his small, bankrupt nation was being
waterboarded.

My response was that we had tried silence and obedience from 2010 to 2014. The
result? A loss of 28% of national income and grapes of wrath that were
“…filling and growing heavy, growing heavy for the vintage”. Thus, it was time
to put to the troika moderate, rational counter-proposals while refusing to
continue to acquiesce to their pretend-and-extend tactics. It was a stance
that I was never forgiven for.

A year after the troika succeeded in having me ejected from Greece’s
government, by prevailing upon Alexis Tsipras to capitulate to them against
the wishes of 62% of Greece’s voters, the IMF’s ‘internal affairs’ is now
confirming that my stance was utterly justified, rather than mistaken or
undiplomatic. Ambrose Evans-Pritchard, in his 29th July Telegraph article, had
this to say about the IMF’s IEO report:

A sub-report on the Greek saga said the country was forced to go through a
staggering squeeze, equal to 11pc of GDP over the first three years. This set
off a self-feeding downward spiral. The worse it became, the more Greece was
forced cut – what ex-finance minister Yanis Varoufakis called “fiscal water-
boarding”. (See below for more pertinent quotations from Evans-Pritchard)

The question now is: What next?

    
    
        What good is it to receive a mea culpa if the policies imposed on the Greek government are the same ones that the mea culpa was issued for?
        What good is it to have a mea culpa if those officials who imposed such disastrous, inhuman policies remain on board and are, in fact, promoted for their gross incompetence?
    

In sum, an urgent apology is due to the Greek people, not just by the IMF but
also by the ECB and the Commission whose officials were egging the IMF on with
the fiscal waterboarding of Greece. But an apology and a collective mea culpa
from the troika is woefully inadequate. It needs to be followed up by the
immediate dismissal of at least three functionaries.

First on the list is Mr Poul Thomsen – the original IMF Greek Mission Chief
whose great failure (according to the IMF’s own reports never before had a
mission chief presided over a greater macroeconomic disaster) led to his
promotion to the IMF’s European Chief status. A close second spot in this list
is Mr Thomas Wieser, the chair of the EuroWorkingGroup who has been part of
every policy and every coup that resulted in Greece’s immolation and Europe’s
ignominy, hopefully to be joined into retirement by Mr Declan Costello, whose
fingerprints are all over the instruments of fiscal waterboarding. And,
lastly, a gentleman that my Irish friends know only too well, Mr Klaus Masuch
of the ECB.

Finally, and most importantly, the apology and the dismissals will count for
nothing if they are not followed by a complete U-turn over macroeconomic,
fiscal and reform policies for Greece and beyond.

Is any of this going to happen? Or will the IMF’s IEO report light up the sky
fleetingly, to be forgotten soon? The omens are pointing to the latter. In
which case, the EU’s chances of regaining the confidence of its citizens,
chances that are already too slim, will run through our leaders’ fingers like
thin, white sand. FURTHER QUOTES FROM EVANS-PRITCHARD

“The report by the IMF’s Independent Evaluation Office (IEO) goes above the
head of the managing director, Christine Lagarde. It answers solely to the
board of executive directors, and those from Asia and Latin America are
clearly incensed at the way EU insiders used the Fund to rescue their own rich
currency union and banking system.”

“While the Fund’s actions were understandable in the white heat of the crisis,
the harsh truth is that the bail-out sacrificed Greece in a “holding action”
to save the euro and north European banks. Greece endured the traditional IMF
shock of austerity, without the offsetting IMF cure of debt relief and
devaluation to restore viability.”

“The International Monetary Fund’s top staff misled their own board, made a
series of calamitous misjudgments in Greece, became euphoric cheerleaders for
the euro project, ignored warning signs of impending crisis, and collectively
failed to grasp an elemental concept of currency theory.” "“Many documents
were prepared outside the regular established channels; written documentation
on some sensitive matters could not be located"IEO report

It describes a “culture of complacency”, prone to “superficial and
mechanistic” analysis, and traces a shocking break-down in the governance of
the IMF, leaving it unclear who is ultimately in charge of this extremely
powerful organisation.”

~~~
summarite
As a centre left I very much like his rhetorics and thinking, but you have to
be extremely careful to take any of this at face value. I was not immediately
involved but close enough and involved enough to the action to read and
discuss these topics at least 1-2 hours a day over the course of late
2010-2014, so I would still not consider myself an expert, but I do have a
rather good feel for how the discussions moved and changed.

The truth is, there was at the time no attractive option. For too long the
Eurozone countries' governments delayed taking a hard decision (and so did
Greece btw), and if you think back to the discussions and insights of the day
that was maybe not the ideal but usually the most realistic, feasible and
often also the most sure approach. The problem was that this went on too long,
more and more intermediate measures were taken to try and counter the crisis,
with billions given to Greece and many more promised if needed. Each time this
involvement got bigger and chickening out less feasible . Then the Eurozone
governments made a huge commitment and let go of probably 2/3 of their demands
(which were mostly sound "stop spending and finally make sure you get all the
money in that you sold theoretically be getting, i.e. fight tax evasion, etc)
and finally things seemed to calm down for a few short months. Prospects
looked good, Greece was sorting out some of the mess the last 8 or so
governments had created.

THEN, after years already of this torment and depending on your calculation
somewhere from 50 bn up to 400 bn Euro being given to Greece, syriza, which
was the absolute extreme left any party across the EU could be, got elected.
They had campaigned with posters of Merkel with swastikas and Germany's
finance minister as Hitler. And they, a party that in the past had never been
>5℅ or so, got the top job and this fringe far left economist named varoufakis
became finance minister and lead negotiator for Greece.

The election campaign was nerve wrecking and threw the country into chaos, the
result even more. By the time they took office the gains of confidence etc had
already disappeared completely, ratings for anything Greek kept spiralling
down and bad news came from Spain, Portugal and Italy.

Varoufakis mostly spent his time giving insulting speeches and interviews.
Then he went to the finance minister meetings, said no to everything and kept
insulting and lecturing them. This is not an exaggeration. His party went back
on a huge part of the agreement that had bought Greece billions in aid. Eg
they started hiring huge amounts of officials, reverted firings, went back on
the promise to sort out their probably messiest pensions scheme in the world,
etc. All that being in direct contradiction to Greece's signed and agreed
terms.

And then they started negotiating again. The third or fourth deal, and each
time Greece failed uphold it's side of the bargain but got billions. Hard
bargaining while things kept deteriorating. Some rough deal is agreed while
the Greek government keeps lying about the demands by the other countries.
Greece's government announced a referendum with a very weird phrasing as
bargaining tactic and campaigned for the people to vote against the EU's new
(and again much lightened) conditions. The vote was against (!) the new
agreement. And three days later, after pretty much three days of finance
ministers and leaders battling in meeting rooms, Greece signed the agreement.
And again got billions. Varoufakis was sacked as he immediately started
criticising everything again.

Varoufakis, personally and with the rest of his party, has probably cost
Greece at least 5℅ of its GDP. His solutions sound great in theory but are
impossible in practice - either because they are just thought experiments of
"what could have been", or because they just demand things from the other side
(in particular the Germans) while promising little in return. You have to also
remember that Greece caused this whole mess themselves. They faked statistics
just to get into the Eurozone and continued to do so for a decade. And the one
honest government that revealed it and generally started sorting out decades
of overspending and cronyism got punished at the polls to a degree hard to
imagine. In particular the Germans are very unhappy with the way they have
been branded for trying to save the union while trying to get the Greeks to,
if they are not able to be accountable to themselves, at least be made
accountable to the countries loaning them billions.

This was not about saving German and French banks. That was one worry,
certainly, but this whole effort was an attempt to save the EU and the
Eurozone and all of Europe from doomsday. Maybe Greece could have exited the
Eurozone without too much pain. Or maybe all Greek citizens would have lost
their savings, all banks been obliterated, the economy completely destroyed
and the country thrown down to a developing country level. The effects for the
remainder of the EU were equally unpredictable. No one knows today and no one
could have known then, claiming anything else is simply dishonest. And
certainly no one dared to make this wager...

~~~
raattgift
"syriza, which was the absolute extreme left any party across the EU could be"

That's a bit hyperbolic; it's not even the most left-wing party in the
Parliament of the Hellenes -- that title should go to KKE, the Communist Party
of Greece, which has 15 deputies. There are minor parties even to the left of
them (e.g. ΑΝΤ.ΑΡ.ΣΥ.Α, the Anticapitalist Left Cooperation for the Overthrow
and Front of the anticapitalist, revolutionary, communist left and radical
ecology), which holds 1-1.5% of the regional governmental seats across Greece.

SYRIZA sits with the same European Parliament grouping as Die Linke, which is
the fourth largest party in Germany, holding 10% of the seats in the
Bundestag. It's difficult to say that SYRIZA is tremendously more left wing
than Die Linke is.

They're certainly less left-wing than Enhedslisten, the Danish Red-Green
Alliance, which propped up a social democrat government in the Danish
parliament from 2011-2015.

There are plenty of Marxist-Leninist and Trotskyist parties in various
national parliaments, and more in regional parliaments. An example is the
Partido Communisto Português, which has about 6% of the seats in the Assembly
of the Republic and a bit more than 10% of the seats in local governments
across Portugal. There's even a few elected positions held the Maoist Workers'
Party of Belgium. SYRIZA is not THAT far to the left!

------
LeifCarrotson
Actual title: IMF admits disastrous love affair with the euro and apologises
for the immolation of Greece

It's nice that you fixed "disastrous love affair with the euro" to read "euro
problems", but there's also plenty of unnecessary hyperbole in "immolation".

~~~
travmatt
Hands down, the best bit of hyperbole during the EU debacle was when Greece's
Finance Minister called the austerity measures 'financial waterboarding'.

~~~
forgotpwtomain
> Hands down, the best bit of hyperbole during the EU debacle was when
> Greece's Finance Minister called the austerity measures 'financial
> waterboarding'.

Can you explain how this is 'hyperbole'[0] ? It's used in a single phrase
'financial waterboarding' which makes it symbolic or metaphorical, unless you
are saying this is an exaggeration of Greece's economic problems, in which
case I would like to know in which way you think they are exaggerated? Would
it need to be 1921 Berlin for it to be 'financial waterboarding' ?

[0] exaggerated statements or claims not meant to be taken literally.

~~~
summarite
The conditions were there to ensure Greece would actually reform, rather than
keep lying about data and overspending each year to an extremely unsustainable
degree. Greece caused the mess 100℅ itself, then turned around and asked for
money. Terms were agreed, billions given, and then Greece turned around and
broke the agreement. After three times breaking agreed bailout terms for which
the country each time got billions, they wanted another bailout without any
conditions while the new government varoufakis was in was actively reinstating
some of the already improved insanity ((re)hiring thousands of officials for
example).

See also my other comment in this thread.

------
kyriakos
How about they do something to help Greece then since they are partly
responsible for the mistake?

~~~
at-fates-hands
Honestly a lot of this should be on Greece.

They racked up huge debts while losing their competitiveness in the global
market. This led to slower growth. Add in attempts to hide how much they were
really in debt and you have a recipe for disaster.

This was compounded by the fact that since they relied on the Euro, they
couldn't just print their way out this situation like the US does all the
time. Instead, they got caught with their pants down and had no alternative
but to own up and take severe measures to right the ship.

~~~
abakker
It seems reasonable to me that the major burden fall on the lenders. After
all, they are the ones tasked with due diligence, credit rating, etc.

I can ask my bank for a $100million loan. If they judge me worth of that, and
then I fail to pay, yes, it is my fault for losing the money, but their fault
for misjudging the risk. The lender has the majority of the power in the
relationship until the loan is given, so it is in their court to make sure
that they do their research.

It appears that the crux of this article is that the IMF didn't do the
research, or did it wrong, and badly misjudged many risks and solutions. The
IMF had reasonably good information about the situation in Greece, and still
didn't see the warning signs.

~~~
ethbro
Or to put it another way, if you feel the majority of the blame falls on
Greece, I'm happy to loan any person in the world a large sum...

Provided I'm given the right to direct their, their children's, and their
children's children's labor towards repaying me.

And how is bending a government towards repayment at all costs different than
enslavement of its citizens? Except in this case the master happened to be
incompetent enough that they made their own repayment less likely.

~~~
wmil
Fundamentally the problem with Greece is that the IMF & EU are focussed on
saving the Euro.

Meanwhile Greece is unable and / or unwilling to meet it's Eurozone
obligations.

The only real solution it to toss Greece out, but negotiate a smooth
transition to a new drachma. Convert all existing debt to drachmas. Greece can
deal with the outstanding debt by devaluing their currency.

However they'll have to choose between letting pensions see their purchasing
power decline, or finally cracking down on tax cheats.

But people have a strange moral attachment to the EU / Euro. So it won't
happen.

~~~
ethbro
> Convert all existing debt

Would that include the debt from northern European banks already offloaded
onto them? Because that seems like an equally terrible deal.

"We're going to bail you out with a loan, the balance goes to your creditors,
you're responsible for repayment, and everyone is pissed at you because we
told them we were giving you cash."

------
PaulHoule
After brexit the EU has to prove that it is not a lights on and nobody home
situation.

~~~
SideburnsOfDoom
Given that "brexit" covers a whole range of incompatible outcomes, some of
which are unpalatable to interested parties such as Scotland, Northern Ireland
and the people who voted for Brexit; so does Britain.

~~~
keithpeter
Westminster parliament is responding to the will of the people as expressed
through the referendum. We shall what form the response takes over the next
few months (Autumn statement will be a significant marker - there will be some
economic data based on actual events then not sentiment or opinion surveys)
and I'm sure the various political groupings will have plenty to say.

My point is that the debt transfer from private banks in predominantly Germany
to the Greek state appears to have been a purely bureaucratic policy designed
to prop up the Euro.

Disclaimer: I actually voted remain on the balance of practicalities.

~~~
TheOtherHobbes
There is no "will of the people" because Brexit was never a well-formed
practical concept.

As a matter of common sense, you can't have a referendum on a word with no
meaning.

Or rather you can, but the result is guaranteed to be a disaster. When there
is no definition everyone agrees on, the only possible outcome is anger and
disillusion because some very significant proportion of the population will be
disappointed.

And even if everyone in the UK agreed on a practical definition - which they
very much don't - the EU might not agree to it in negotiations.

The entire business was utterly dishonest.

There's a huge difference between 'Do you want to leave the EU?" \- which is a
meaningless catch-all promise that covers all possible and impossible hopes -
and "Do you want to leave the EU under these specific terms and conditions?"

~~~
keithpeter
Yes I agree that we don't know what the people who ticked the 'leave' box
actually voted _for_.

The Westminster parliament(1) will now arrive at a series of policies to
embody that choice and those policies will have to be negotiated through a
long and complex process with the various EU institutions concerned. What
emerges from that process will probably not fit anyone's conception of what
they were voting for. As a (marginal, 5.5/10) remain voter, I would be
inclined to point out that if you vote for radical change, radical change is
what you get!

I'm pretty sure that the Westminster government(1) will seek a mandate for
their choice through a general election.

(1) I'm referring to the Westminster parliament and government here as there
are of course huge issues with the position of Scotland (which voted very
heavily in favour of 'remain') and of Northern Ireland (which also voted less
heavily in favour of remain, and which also has the added complexity arising
from the Ulster Agreement, and the Ireland Act / Common Travel Area). The
devolved assemblies in Scotland/NI will be fighting their corner and trying to
see what they can get. Not sure about Gibraltar yet.

~~~
SideburnsOfDoom
> I would be inclined to point out that if you vote for radical change,
> radical change is what you get!

Yes, it's like voting for Trump, you have voted against "the system" and you
will get ... something else. it will change, to something unknown. You might
end up not liking it much.

------
BenoitEssiambre
A properly managed currency could allow for Greece's labor and investment
market gridlock to suddenly resolve itself putting a large part of the
unemployed back to work.

The type of austerity that the euro group wants leads to disinvestment. It is
like forcing a person to sell his or her tools and equipment to make this
year's debt payments. No longer being able to work productively anymore
without tools, how is that person supposed to make next year's payments?

The ECB has prevented Greece and all economically disadvantaged regions of
Europe from getting the investment they need to work and get out of their
morass. At this point a considerable part of the debt is a direct result of
perennial monetary strangulation and not caused by the indebted themselves.

Some people may be afraid that allowing sufficient funds for investment into
Greece may result in the money being diverted into short term spending instead
of into long term sustainable investment. To reuse the metaphor, the lender is
afraid the borrower will not buy tools with the money and work but instead buy
a vacation in Santorini. It is somewhat a valid concern but then if there is
this much distrust from other members of the eurozone that people in Greece
are not even given the means to work, there is zero reason to continue the
relationship and Greece should default and break off.

The fact that unemployment is widespread in Europe, not just in Greece tells
us that the main source of problems is the damaging monetary situation caused
by the ECB, not greek laziness. Greece has already achieved a primary surplus,
they went through a huge amount of pain to correct their finances. And they
did it while the ECB was continuously throwing sand in their gears, keeping
inflation too low and real interest rates above a rate that gets Europe to an
acceptable level of employment. This disproportionately affects economically
disadvantaged regions.

Monetary policy in Europe is run so that only the areas that have natural
economic advantages can prosper while investment is sucked out of weaker
regions and turned into idle excess fiat. If Greece, through gargantuan
efforts managed to be so productive as to offset their natural disadvantage
and the European economy started heating up, the ECB would tighten yet again
and vacuum investment out of the next weakest region causing a similar crisis
there.

Only when the ECB will have produced an acceptable level of unemployment in
the eurozone will you really be able to start blaming individual countries for
their economic woes. After the reforms in Greece, if the ECB did an half
decent job, Greece might well have been able to pay the entirety of their debt
without too much pain, and if they still didn't, then you would have had a
case for corrective austerity there. But you cannot have government austerity
at the same time as monetary over tightness (read private sector suffocation).
That is just mathematical nonsense.

To make another darker metaphor, if there is so much distrust and resentment
toward the Greeks that people think they should be made into slaves to pay for
their debt, even then, it would make no sense to refuse to provide the tools
and infrastructure to enable them to work. What good are non-working slaves?
Of course, the relationship should break off well before we get to this
extreme. Sometimes it seems like Germany doesn't mind moving towards this
nonsensical non-working slaves scenario.

The only real solution will have to start with the ECB moving to a higher or
better inflation target that doesn't choke their continent's economy and that
allows weaker members to labor towards recovery.

------
Lidador
Fake news. It is as simple as that.

