The US Congressional Monetary Policy and Trade Subcommittee held a hearing on Thursday to evaluate lessons from the International Monetary Fund’s (IMF) bailout of Greece in 2010 and 2012.
“With Greece’s economy again officially in recession and discussions underway for a third IMF bailout, it is clear from today’s hearing that the IMF’s past efforts to save Greece from insolvency have been unsuccessful and that it needs to learn from those failures,” said Subcommittee Chairman Andy Barr. “The IMF must focus on its core mission, not provide political cover for Eurozone politicians who refuse to take responsibility for Greece’s debt crisis.”
Among the key point from the hearing were that the IMF’s bailout of Greece has politicized the Fund and left the Greek economy in tatters, tarnishing the IMF’s reputation and putting taxpayer dollars at risk.
Also, Eurozone officials are using the IMF as a fig leaf to avoid electoral consequences, even though Europe’s own bailout fund possesses ample resources to resolve the Greek crisis on its own.
The witnesses that were called to talk to the Subcommittee, testified some interesting points.
Paul Blustein, Senior Fellow, Center for International Governance Innovation stated that “in retrospect, the IMF should not have submitted as readily as it did to European political exigencies; reputation-wise, the Greek crisis has been perhaps the worst debacle in the Fund’s history.”
Meg Lundsager, Public Policy Fellow, Woodrow Wilson Center, testified that “given that the largest share of the debt is owed to Greece’s European partners, this is the opportune time for the IMF to disengage from financing Greece’s adjustment program. At this time, Greece’s outstanding debt to the IMF has dropped to less than $14 billion, while its debt to European partners remains over $200 billion”.
Finally, Dr. Rebecca Nelson, Specialist in International Trade and Finance, Congressional Research Service, underscored that “co-financing limited the IMF’s financial commitment to Greece, but the IEO found that the so-called ‘troika’ arrangement of the IMF, European Commission, and ECB constrained IMF policy decisions and potentially subjected IMF staff’s technical judgements to political pressure”.