An internal review of the Greek bailout program by the International Monetary Fund has found that the organization made serious errors during the last three years and that the European Commission’s decision making was also suspect.
The report is due to be published on Thursday but extracts were leaked by the Wall Street Journal on Wednesday. According to the report, the IMF admitted that it underestimated the recessionary impact of the fiscal policies Greece was asked to implement as part of the bailouts, the first of which was agreed in May 2010. “The fiscal targets became even more ambitious once the downturn exceeded expectations,” the report said.
However, it acknowledges that more funds would have been needed if the macroeconomic projections had been accurate.
“While earlier adjustment of the targets could have tempered the contraction, the program would have then required additional financing,” the document said, according to the Wall Street Journal.
The report also highlights the errors made in projecting the country’s debt and suggests that Greece should not have qualified for further loans due to doubts about the sustainability of its debt.
The Fund, however, described the bailout as a “holding operation” that gave the rest of the eurozone time to protect itself from any negative consequences of the crisis in Greece.
The IMF also highlights problems in coordination with the other troika members, particularly the European Commission, which “tended to draw up policy positions by consensus… and had no experience with crisis management.” The Washington-based body also accuses Brussels of not being “able to contribute much to identifying growth-enhancing structural reforms.”
The Fund suggests that the restructuring of Greece’s enormous debt, which was carried out in March 2012, should have been carried out much earlier but that it would have been difficult to get other eurozone members to agree because some of their banks held a considerable amount of Greek government bonds.
The report also criticizes Greek governments for failing to progress convincingly enough with structural reforms and not spreading the burden of fiscal adjustment evenly across society, the Wall Street Journal reported.