By tothetick
Once upon a time, there was (and still is) the International Monetary Fund. Their story reads something like this. It’s not all make-believe; it actually happens.
It never ceases to amaze that we vote people into positions. Those people that we have voted in elect in turn (or just go ahead and appoint without an election, making it all look very transparent) other people who are not as important but who will have the possibility of choosing (apparently in an “open, merit-based, and transparent manner”) someone who will be more important than they are, but less important than the first person that is in the voting/appointment chain. If it’s getting complicated by now, that’s the whole point of it. It’s meant to look complicated from the outside, so that we all lose in interest in the last person that’s being appointed in the said chain. Then, we allow that last person to take decisions all around the world, dish out the dough and tell other countries that they have got it all wrong, imposing austerity here and there willy-nilly as if it has been decided over a croissant in some Washington D.C. Hotel. The, to cap it all, that person stands up last night and says something along the lines of: “sorry boys, we went a bit tough on you I guess”. But, hey, the damage is done now, so what are we going to do? The answer is probably little, as usual.
Christine Lagarde announced yesterday in a press statement following an International-Monetary Fund report released on the austerity program offered to Greece in 2010 and 2012, that mistakes had been made. It had failed to see the full extent that austerity would have on the Greek economy. In 2010, they provided 110 billion euros in a loan to keep the Greeks afloat. But, there was an obligation to restore the fiscal balance through the setting up of an austerity program as well as the privatization of state assets (to the tune of 50 billion euros). The privatization of assets took longer than had been planned and structural reforms were not being put into place, so the IMF provided another bailout of 130 billion euros (not all on their own, along with the Eurozone in both instances).
The present situation in Greece is pretty dire. Unemployment stood at 24.4% (2012) and has since increased to 27% in February 2013. That’s a rise from 17.4% from 2011. Youth unemployment has hit 60% (aged 15-24 years old) and the country is being crippled by the austerity measures. Inflation was -0.6% in April 2013. The national debt of the country stands at more than 381 billion, clocking up more than 50 billion more each year in interest alone. The debt represents 189.19% of GDP today.
Neither the bailout of 2010, nor the one that took place last year to patch the wounds up did very much to help the Greeks out of their predicament. The only thing that the IMF did largely was to enable the setting of the scene to push the Greek people into such a corner that they would elect a far-right fascist party, the Golden Dawn. In 2012, the waning economic bailout measures that were not showing through in Greece resulted in the break-through by the Golden Dawn Party (7% in the elections), who vowed to turf the immigrants out of Greece and make the country good again. Of course, it’s the immigration problem, isn’t it? In Greece 1/5 of the population is from immigration. But, that’s not the problem. Why oh why do we always have to fall back on the scapegoat theory and choose the people that we want to blame for our own mistakes?
The IMF and the European Central Bank may have kept the Greeks in the Eurozone. But, it was at a price. Market confidence has not been restored and unemployment has continued to rise. The poorest in the country were hit and are still being hit the hardest. Of course consumer confidence hasn’t returned in a country where we still talk of ousting them from the Eurozone, and perhaps even the EU. We refer to them as one of the PIGS. Would you fancy being an ‘oinker’ in the family? Would that restore your confidence?
The contraction of the economy of Greece is beyond the IMF’s wildest nightmare-scenario situation. They thought it would contract by just 5.5%. It turns out that it’s more than three times that (17%). Wonderful mathematical wizardry. Calculations are not easy at the best of times, but in times of crisis , they are even harder.
Stories that begin by “one upon a time” are not always for children. The Greeks aren’t children, but the IMF belittled them. The IMF told them they had to do this and that they had to do that; and it was that which brought them down even more. But, they had to be publically punished to make sure that the others that were getting bigger around the world didn’t end up doing the same thing. Who in their right mind would ask the IMF now for money? You would have to be desperate, wouldn’t you? It would only plunge you further into economic disarray. What a botch-job by the IMF. Well done guys. Credibility just went (further) down the pan. What did you expect? But, what’s worse, the Greeks are the ones that are being hit the hardest at the moment. They have just taken another slap in the face from Ms. Lagarde. Isn’t it magnanimous to admit one’s mistakes? Absolution?
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