IMF admits we screwed up

[Sir X]

Karl Whelan, Contributor
I am an economist covering news on European macro issues.
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6/05/2013 @ 4:57PM |789 views

IMF On Greece: We Screwed Up But It's Really The Eurozone's Fault

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For Euro crisis enthusiasts, today’s IMF review of its Greek program is a real treat. By official standards, the document is thoroughly honest and clear. The report contains two clear messages. Message One: We screwed up. (This is widely accepted outside the IMF but the admission is refreshing all the same.) Message Two: Dealing with the Eurozone countries was impossible and it’s really their fault.[/font]
Christine Lagarde (Photo credit: Wikipedia)

In relation to Message One, there’s a fair amount of self-flagellation. They knew from the start the debt problem would need a restructuring[/font]

the Fund had misgivings about debt sustainability.

And the report makes clear they violated their usual criteria of only lending where there was “a high probability of public debt being sustainable in the medium term.”[/font]

The fund also admits they underestimated the negative effects of austerity and mis-judged the capacity of the Greek government to deliver quick structural reforms[/font]

the depth of ownership of the program and the capacity to implement structural reforms were overestimated.

If you’ve been following IMF pronouncements in recent years, none of this is too surprising. What is more interesting about the document is Message Two. It is extremely (but fairly) harsh on the role played by the Euro area member states. On the crucial question of should there have been an early debt restructuring, the finger is pointed directly at the Europeans. This section is worth quoting at length.[/font]

Yet in Greece, on the eve of the program, the authorities dismissed debt restructuring as a “red herring” that was off the table for the Greek government and had not been proposed by the Fund (Papaconstantinou, 2010). In fact, debt restructuring had been considered by the parties to the negotiations but had been ruled out by the euro area.

Some Eurozone partners emphasized moral hazard arguments against restructuring. A rescue package for Greece that incorporated debt restructuring would likely have difficulty being approved, as would be necessary, by all the euro area parliaments.

Debt restructuring would directly hurt the balance sheets of Greek banks. This would imply a call on the program’s financing that would exceed the amount set aside for bank recapitalization under the HFSF.

Debt restructuring risked contagion to other members of the Eurozone and potentially another Lehman-type event, yet the EFSF was not yet in place. European banks had large holdings of Greek bonds – but also, and of more concern given the scale of their exposure, had large holdings of the bonds of other European sovereigns that would drop in value were Greek creditors to be bailed in. For the euro zone as a whole, there might be limited gain in bailing in creditors who subsequently might themselves have to be bailed out.

The Europeans are then blamed for fiddling while Athens burned[/font]

the Greek program was also subject to considerable uncertainty as the euro area policy response evolved. For example, the initial euro area position that debt restructuring was off the table was eventually reversed, although this took a considerable length of time. Similarly, there was an extended process before euro partners reached agreement on relaxing the fiscal stance.

Finally, it’s clear that the IMF considered the requirements set down by the EU to have been far too detailed (the document doesn’t use the phrase “micro-managing” but it’s clear this is meant).[/font]

The detailed nature of the structural fiscal conditionality in the Greek program also bears scrutiny given the premium attached to parsimony in Fund conditionality.

And they found it difficult to co-ordinate things with the ECB and the European Commission because[/font]

There was no such clarity in the assignment of responsibilities across the Troika.

Congratulations to the IMF staff on a well-written and clear report. I’ll come back later with more discussion of the lessons learned but for now I encourage everyone to read the report.[/font]

[Sir X]

The Jamaicanization of Europe

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Europe Economy , Europe Jamaica Economy , Europe Recession , Eurozone Debt ,Eurozone Economy , Eurozone Recession , Jamaica Economy , World News

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Jamaica, an English-speaking Caribbean island nation of 2.9 million people, may seem worlds away from Europe. The country's income per person of $9,000 ranks it 88th in the world, as compared to the Eurozone countries, which are three or four times richer. But they face a common problem, and although none of the Eurozone countries is likely to become as poor as Jamaica is today, they could easily -- going forward -- mimic the dismal economic performance that Jamaica has seen over the past 20 years.
Jamaica has the world's highest public debt burden: interest payments on the government's debt account for 10 percent of the country's national income. (For comparison, Greece -- with the worst debt burden in Europe, is paying 6.8 percent of GDP in interest.) This leaves little room for public investment in infrastructure, or improving education or health care. Partly as a result of this debt trap, Jamaica's income per person has grown by just 0.7 percent annually over the past 20 years.
Two years ago Jamaica reached an agreement with its creditors, brokered by the IMF, that restructured its debt. Interest payments were lowered, and some principal payments were pushed forward. But the debt burden remained unsustainable. The IMF now projects that Jamaica's debt will reach 153 percent of GDP in just three years.
Sound familiar? That is what happened to Greece just four months ago. The Greek government reached an agreement with the European authorities (the "Troika" of the European Central Bank or ECB, the European Commission, and the IMF) that reduced its debt. Unlike in Jamaica, the private investors holding Greek debt took a "haircut," losing about half of the principal. But still it wasn't enough. Before the ink was dry on the deal, an IMF estimate of a "pessimistic scenario" going forward showed Greek debt reaching more than 160 percent of GDP by 2020. Since the IMF's projections for Greece over the past few years have proved enormously over-optimistic, and with Europe sliding further into recession, the pessimistic scenario is the more likely one. This means that even if Greek voters end up with a government that accepts the agreement -- by no means guaranteed -- it is likely that their economy will limp along from one crisis to the next until there is another restructuring, or a chaotic default.
In both Greece and Jamaica, the problem is not just the debt itself but even more, the policies that the creditors have attached to further lending. In Greece it is extreme: the Troika insisted on Greece cutting 8.6 percent of GDP from its fiscal deficit over the past two years -- the equivalent of the United States wiping out its entire federal budget deficit of $1.3 trillion. Naturally the economy went into a tailspin. In Jamaica, the IMF also attached conditions during the 2008-2009 economic crisis that worsened the country's downturn.
Europe's problem with harmful policies attached to official lending is not limited to Greece. Dow Jones' recent headline tells the sad story of Portugal in a sentence: "EU: Portugal Will Need More Austerity to Meet Deficit Targets." Yes, the European Commission wants Portugal to make even bigger budget cuts because the ones that they already made have shrunk the economy so much that they won't make their target deficit-to-GDP ratio. The economy is projected to shrink by a painful 3.3 percent this year, and official unemployment has risen from 12.9 percent last year to 15.3 percent. Ireland is in recession, yet it is also engaging in big budget tightening.
Spain hasn't yet had to borrow from the Troika, but has followed the same policies. With more than half of its youth languishing in unemployment, Spain's fiscal tightening -- according to the government's projections -- will carve 2.6 percent out of its economic growth this year.
Of course there are many important differences between the situation of the Eurozone countries and Jamaica, and among the Eurozone countries themselves. Jamaica needs debt cancellation; some of the Eurozone countries in trouble, for example Spain, would have a sustainable debt burden if the ECB would simply intervene in the sovereign bond markets and guarantee a low interest rate on their bonds. And the ECB, as the issuer of a hard currency in a monetary area with no serious inflationary threat, has a lot of room to do whatever is necessary to make sure that all of the Eurozone countries have low borrowing costs and therefore sustainable debt.
But the ECB has refused to use its powers to put an end to the sovereign debt crisis, preferring instead -- hand-in-hand with the rest of the Troika -- to exploit it in order to force unpopular political changes in Eurozone countries, especially the weaker ones. In so doing, they are condemning these countries to the long-term stagnation of high unemployment and slow growth that Jamaica has suffered for the past two decades. Although the human costs are much higher in a developing country such as Jamaica, it's a lot of unnecessary suffering on both sides of the ocean.
This article was published in The Guardian (UK) on May 18, 2012.

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[Sir X]

Economist

Weisbrot earned a Ph.D. in economics from the University of Michigan. His 1993 thesis, Ideology and method in the history of development economics,[4] was supervised byW. H. Locke Anderson.[5][6] In 1999, he co-founded, together with economist Dean Baker, the Center for Economic and Policy Research (CEPR), "to promote democratic debate on the most important economic and social issues that affect people's lives".[7] Weisbrot is co-author, with Baker, of Social Security: The Phony Crisis (University of Chicago Press, 1999). In the book, Weisbrot and Baker argue that much of the United States Social Security debate has been based on misconceptions, that privatization would be unlikely to improve the system, and that the system in fact performs satisfactorily and does not need fixing.[8]
Commenting on international matters, Weisbrot argues that globalization, as understood by the United States government and American lending institutions, has failed to live up to its promise of making poorer countries grow rich, stating that "no nation has ever pulled itself out of poverty under the conditions that Washington currently imposes on underdeveloped countries."[9][10] He has criticized the role played by the IMF[11] and has taken an active role in developing the Bank of the South, a joint project by Argentina,Brazil, Paraguay, Uruguay, Ecuador, Bolivia and Venezuela spearheaded by Venezuelan president Hugo Chávez and designed to make South America financially less dependent on the IMF and World Bank.[12][13] Weisbrot acted as a consultant to the governments concerned and has been described as the artífice intelectual, the intellectual architect, of the concept.[14][15]
Weisbrot's work on Latin American countries (including Argentina, Bolivia, Brazil, Ecuador and Venezuela) has attracted national and international attention,[16][17][18][19][20][21] and in 2008 was cited by Brazilian Foreign Secretary Celso Amorim.[1] In early 2010 Weisbrot's work on Latvia's economic crisis attracted national[22][23][24] and international attention.[25][26][27]
Weisbrot is also the President of Just Foreign Policy, a non-governmental organization dedicated to reforming United States foreign policy.[28]
Media work

Weisbrot writes a column on economic and policy issues that is distributed across the United States by McClatchy-Tribune Information Services.[29] His work appeared in such publications as The Washington Post, the Los Angeles Times, The New York Times/International Herald Tribune, The Boston Globe and The Nation as well as news websites such as AlterNet,[29] the Common Dreams NewsCenter[29] and The Huffington Post.[30] Internationally, Weisbrot writes a column for the UK's The Guardian, and for Brazil's largest newspaper, Folha de S. Paulo.[29] He has appeared on national and local television and radio programs, including CBS, the PBS Newshour, CNN, the BBC, National Public Radioand Fox News.
Weisbrot's commentaries on Latin American affairs have been broadly sympathetic to many governments in South America, including Argentina,[31][32] Bolivia,[33] Brazil,[34]Ecuador,[35] and Venezuela.[21][36][37] In particular, Weisbrot has praised Latin American governments' attempts to assert stronger national control over key national resources, and to take a tougher stance in relation to foreign creditors. Weisbrot has also criticized some of these governments' policies.[38][39]
In 2009, Weisbrot and Tariq Ali wrote the screenplay for the Oliver Stone's South of the Border,[40][41][42] which examined the "pink tide" of elected leftist governments in South America.[43]

[Sir X]

IMF and World Bank are losing clout in developing countries....Xcept Ja

Developing nations are organising within the IMF and World Bank to counter their neoliberal policies

• 
• • Mark Weisbrot
  • The Guardian, Thursday 30 May 2013
  • Jump to comments (42)

‘Jim Yong Kim is an anomaly at the World Bank: the first president with real, positive development experience after more than six decades of bankers at the helm.’ Photograph: Denis Balibouse/Reuters

There is a battle going on within and outside the World Bank right now over its flagship Doing Business report and index. This may not appear to be exactly a household issue, but the fight is a very significant one for a number of reasons.
The index ranks countries according to the "ease of doing business", including such things as starting a business, enforcement of contracts, paying taxes and other indicators. It has been under attack for years because it has a built-in bias against many regulations that people who care about the progress of humanity might see as important: employment protections; necessary taxation; health, safety and environmental regulation; and of course most state-led development policies.
As noted recently, the fact that the Bank gives higher marks for "fewer restrictions on permits for construction" means it ignores the safety and environmental concerns that can contribute to disasters such as last month's Bangladesh factory collapse.
There is evidence that countries have deregulated in harmful ways in order to get a better ranking. And despite years of controversy and a 2008 internal evaluation critical of the index, the Bank still uses it as a criterion for lending to low-income countries.
Now comes Jim Yong Kim, president of the World Bank since last July, appointing a panel to evaluate Doing Business. Never mind that he chose the South African finance minister, Trevor Manuel, well-trusted in neoliberal circles, to head it. Or that the panel did not contain a single member from the numerous, and in some cases quite large, civil society organisations critical of the index. Important people are worried.
Dan Runde of the Centre for Strategic and International Studiesdescribes the concerns of Washington's foreign policy establishmentrather nakedly: "Doing Business was incubated with strong support from the Bush administration through contributions to the methodology from USAid, funding from USAid, and political support from state and treasury … "Because the World Bank should be a force multiplier of American influence in the world, Republicans supported (and rightly so) the renewal of the general capital increase of the World Bank … the US should be expected to retain its 'big seat' at the table and exercise that influence with Jim Kim and bring in allied shareholders in favour of strengthening Doing Business."
The financial press has inaccurately portrayed the fight as "China seeks to water down key World Bank report" – the headline of the Financial Times's report on the controversy. But China is just one of many countries, and a latecomer at that, which have opposed the index within the Bank. Opposition has come from Brazil, Argentina, India and other developing countries.
And that is perhaps the greatest significance of this fight: developing countries are beginning to organise within the World Bank and the International Monetary Fund in order to change policies. These two institutions have been controlled by Washington, with varying amounts of input from other rich countries, since their founding nearly seven decades ago. Many of their policies have been harmful to developing countries. But in contrast to the World Trade Organisation – where developing countries form blocs and fight for their interests – the world's majority has mostly let the rich countries run the show in the IMF and World Bank.
Over the past decade the IMF has lost most of its power in developing countries and, as a result, Washington has also lost its most important avenue of influence over their policies. The middle-income countries of Asia, most of Latin America, Russia and others all made sure that they would never have to borrow again from the fund.
The World Bank has exercised much of its influence in conjunction with the IMF, but this arrangement too has been weakened. So now, the Bretton Woods twins have most of their power in weaker and poorer developing countries. (Ironically, the vast majority of the IMF's loans are now in Europe, but the fund is not the main decision maker there.)
Jim Yong Kim is an anomaly at the World Bank: the first president with real, positive development experience after more than six decades of bankers at the helm (with a couple of war criminals thrown in). It remains to be seen how much he can change the institution. But it's a good sign that developing countries are beginning to put up a fight.

[Sir X]

International Crisis Group Against Venezuela
by Mark Weisbrot
The International Crisis Group (ICG) sells itself as "working to prevent conflict worldwide" but there is one country where their mission looks more like promoting rather than preventing conflict. Exhibit A is their report on Venezuela, released on Friday.
There is a lot wrong with this report -- most of it reads like a statement from the Venezuelan political opposition, rather than a neutral third-party observer. But the most ugly and pernicious thing is the report's insistence that "the validity of the election result [in Venezuela] needs to be clarified" and that a "full and transparent audit result" is necessary, or else the government's "rule will increasingly come to be seen by many as an imposition, with unpredictable, possibly violent consequences."
These statements strongly imply that the Venezuelan government is to blame if the opposition returns to violence, as it has in the past, in its ongoing refusal to accept the results of a democratic election.
For the governments of Latin America, and almost all of the world, there is no doubt about the "validity of the election result." It is really only the Venezuelan opposition and the U.S. government that has questioned it.
The International Crisis Group has a $20 million dollar annual budget, about half of which comes from the United States and allied governments who share the State Department's political agenda, with additional contributions from big oil companies including BP and Shell. So in some ways it is not surprising that it would take the position of the U.S. government, even when the U.S. government is, as in this case, completely isolated in the world. However, the ICG does not always do this in other countries, so this report stands out as a particularly disgraceful blot on their record.
The report is so heinously one-sided that it does not even mention the results of the audit that took place on April 14, the day of the election. In Venezuela, voters express their preference by pressing a computer touch-screen, which then prints out a paper receipt of their vote. The voter then checks to make sure that the receipt was the same as her choice, and deposits the paper receipt in a sealed box.
When the polls closed, a random sample of 53 percent1 of all the machines (20,825 out of 39,303) was chosen, and a manual tally was made of the paper receipts. This "hot audit" was done on site, in the presence of the observers from both campaigns, as well as witnesses from the community. There were no reports from witnesses or election officials on site of any discrepancies between the machine totals and the hand count. Nor has the Capriles campaign alleged that any such discrepancies occurred.
What does this fact that ICG left out of its report mean? It means that the probability of getting this audit result, on April 14, if in fact Capriles had won the vote, is less than one in 25 thousand trillion (see here and here). Which means that a "full and transparent audit result" has already occurred, but the ICG -- without saying why, in its 16-page report with 77 footnotes -- doesn't seem to think it means very much.
Nonetheless, the National Electoral Council, at the request of the Capriles campaign, is auditing another 12,000 of the remaining 16,000 ballot boxes in the same way. But the opposition decided to boycott this audit, after it first agreed to it. The ICG adopts the opposition spin on these post-electoral events, implying that it is the government that is reneging on its commitment by not doing the "100 percent audit" that the opposition wanted.
This part of the report is particularly laughable:

Multilateral organisations, such as the Union of South American Nations (UNASUR) and the Organisation of American States (OAS), and regional powers, such as Brazil, need to make clear that they will not tolerate further destruction of the rule of law and democratic values.

Perhaps ICG doesn't know it, but UNASUR and Brazil have already made it very clear that "they will not tolerate further destruction of the rule of law and democratic values." It's just that their idea of the rule of law and democratic values is different from that of the ICG and its government sponsors: it includes respect for the results of democratic elections. That is why all of the presidents of UNASUR countries met in Lima on April 18 after the election and why most of them flew to Venezuela the next day to attend President Maduro's inauguration.
Lula da Silva said, in rejecting the U.S. government's attempt to de-legitimize the Venezuelan election, "Americans should take care of their own business a little and let us decide our own destiny."

And on May 9, Brazilian PresidentDilma Rousseff made a similar statement, while standing next to President Maduro of Venezuela:

President Dilma Rousseff stated on May 9th that South America must reaffirm its 'capacity to resolve its own problems'. And, without naming other countries, she condemned 'hegemonic pretensions' and 'foreign interference.'

For UNASUR and its biggest member country, Brazil, the threat in this case to the rule of law and democratic values is coming from the U.S. government and its allies, not from the Venezuelan government. It's really shameful to see the ICG promote political conflict by trying to de-legitimize election results that everyone else can see are valid.

1 Another 1.02 percent was audited the next day.
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C. This article was first published in CEPR's

[Sir X]

They wont admit it to Jamaica or in Jamaica ...IMF 'to admit mistakes' in handling Greek debt crisis and bailout
Internal reports to suggest International Monetary Fund underestimated the damage austerity would cause to the eurozone country
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Larry Elliott and Helena Smith
guardian.co.uk, Wednesday 5 June 2013 13.18 EDT
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Protesters from communist-affiliated trade union PAME march during a rally against labour reforms in Athens 23 May 2013. The IMF is to admit mistakes in handling the Greek bailout. Photograph: John Kolesidis/REUTERS
The International Monetary Fund is to admit that it has made serious mistakes in the handling of the sovereign debt crisis in Greece, according to internal reports due to be published later on Wednesday.

Documents presented to the Fund's board last Friday will reveal that the Washington-based organisation underestimated the damage austerity would cause to the eurozone country, which has required two bailouts in the past three years.

The Wall Street Journal reported that the papers would say that financial support from the Fund, the European Central Bank and the European Commission had bought time for Greece but had only been made possible because the IMF had bent its own rules to make the country's debt look more sustainable than it was. According to the WSJ report, Greece failed to meet three of the Fund's four tests to qualify for help.

A Fund spokeswoman said: "We will be publishing a number of papers on Greece later today. The board met last Friday to discuss several documents on Greece including the review of its programme and its annual economic assessment."

Greece became the first eurozone nation to require a bailout by the international community in 2010, but needed a second round of financial assistance in early 2012 when a deep recession and high interest payments threatened to send its debts spiralling out of control.

The so-called troika of the IMF, ECB and EC forced private sector bondholders to write down the value of their Greek bonds in an attempt to bring the country's debts down to sustainable levels of 120% of national income by 2020.

Christine Lagarde, the managing director of the Fund, has said many times over the past year that Greece should now be in a position to pay off its debts, but the WSJ reports that IMF staff believe this cannot be said with any certainty.

In Athens, officials reacted with barely disguised glee to the news.

The report confirms what Greek officials have long said: that the first bailout of uncompromising budget cuts and tax increases, the price of 110 bn euro in emergency funds in May 2010, was the wrong prescription for a country not only batting a monumental debt load but rampant tax evasion and a flourishing black economy.

Under the weight of such measures – applied across the board and hitting the poorest hardest – the economy, they said, was always bound to dive into an economic death spiral. "For too long they [troika officials] refused to accept that the programme was simply off-target by hiding behind our failure to implement structural reforms," said one insider. "Now that reforms are being applied they've had to accept the bitter truth."

The Greek media recently quoted IMF managing director Christine Lagarde describing 2011 as a "lost year" partly because of miscalculations by the EU and IMF. The authoritative Kathimerini newspaper said the report identified a number of "mistakes" including the failure of creditors to agree to a restructuring of Greece's debt burden earlier – a failure that had had a disastrous effect on its macro-economic assumptions.

"From what we understand the IMF singles out the EU for criticism in its handling of the problem more than anything else," said one well-placed official at the Greek finance ministry. "But acknowledgement of these mistakes will help us. It has already helped cut some slack and it will help us get what we really need which is a haircut on our debt next year.........Weisbort was right.

[Muadib]

Edward Seaga supposed to be your Hero..

When him tell dem fi guh suck someting in the late 80s wid dem liberalization campaign and Manley sellout to get back in power.. yuh mussi did vex !

[Sir X]

Ohh yes top of my list in f##king up the nation, thats the man right there , beg and borrow , 8 % growth post gilbert ,lick off im right hand man ead (jim Brown) that was the start of crime control in the garrison- the blue print for duddusgate , a mean di man write im own bibliography.

Hero is too kind a word, pity we didnt have 20 more years to ballon that 2 billion debt with fine financial skills.

[Muadib]

Debt to GDP was trending down in the late 80s and in 1990 was 90%...

Then Manley an PJ sell us out to the Merica Right Wing Capitalists and liberalize like it going out of style.. against Seaga strident warnings..

Look like yuh deh pon crack..

[Sir X]

2 billion and counting under the IMF , the great Seaga with 8 % growth.Then Manley & PJ carried on the same madness .

Me on crack or them ?

[Muadib]

Manley and PJ did not carry out the same madness...

They never even made it to 2% Growth.. instead they made policy decisions that led to a 48% hit to GDP and a collapse of the Financial Sector..

Stay away from the Crack... it makes you say very stupid things...

[Sir X]

Did they get us from out of the IMF net, it must have had a price ,that said it doesnt excuse their economic mismanagement , same applies to the JLP.

Thats your dilema , you tear down one to justify another without looking at the bigger issue (holisticly), were any of the policies irrespective of party good for Jamaica in the long term.

You need to stop vomiting party propoganda as some sort of solution , it makes you look , clueless and out of depth ,citing seagas bibiliography as proof is honestly a joke.

Ask yourself and try to answer basic questions i.e Jamaica is a failed economic state because of tribal politics and both parties played a pivotal role in that .how ? why ? when ? where ? what ?

1st thing you have to look at is terms of governance i.e constitution
2nd thing is representation i.e the common man voice , because his needs has to be addressed before Jamaica moves forward.
3rd the economics of it all because that vassel encompasss it all , constitution and represntation i.e it takes cash to care .

To break it down simply , ask yourself why is the PNP a well oiled robbing machine , what vehicle is in place for them to advance the robbing beg and borrow agenda ?

Get back to me !

[Muadib]

Get us out of the IMF net ??!

lol ! woiee !!

Yuh sound like PJ.. gleefully announce dat uunuh pay off 3% money while piling up a Mountain of 20% Money.. wheh yuh seh.. refinance 3% with 20%..

lol ! woiee !

Is not crack yuh deh pon.. sumting wuss !

[Sir X]

OK thats the level you are at .

Next.

[Muadib]

When man chat faught him nuh muss get certain treatment ?

Mi nuh suffah fools gladly...