IMF Official on Greece

IMF's  Olivier Blanchard

Greece: Past Critiques and the Path Forward (9 July)

Blachard says:

·         The 2010 program only served to raise debt and demanded excessive fiscal adjustment.

·         The financing given to Greece was used to repay foreign banks

·         Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression

 A realistic solution had to involve some adjustment, some financing, and some debt

relief — a balanced approach. The role of the IMF in the negotiations was to ask for specific credible adjustments in policies, and make explicit the financing and debt relief implications.

A Path Forward 

1. ... a more explicit recognition of the need for more financing and more debt relief.

2. ... lower reforms and fiscal targets for Greece means a higher cost for the creditor countries. The role of the Fund in this context is not to recommend a particular decision, but to indicate the tradeoff between less fiscal adjustment and fewer structural reforms on the one hand, and the need for more financing and debt relief on the other.

3. The room for agreement is extremely narrow, and time is of the essence. There should be no doubt that exit from the Euro would be extremely costly for Greece and its creditors. The introduction of a new currency, and of redenomination of contracts, raises extremely complex legal and technical issues, and is likely to be associated with a further large decline in output.  It may take a long time for the depreciation of the new currency to lead to a substantial turnaround.

Source

http://blog-imfdirect.imf.org/2015/07/09/greece-past-critiques-and-the-path-forward/

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