FT: IMF giddy with ‘glee’ over Greece’s devastation
When a newspaper as even-keeled and to-the-facts as the Financial Times can’t resist making a crack about how cold and heartless the IMF is, inquiring minds might suspect that there’s a grain of truth to it.
Alan Beattie recently reported in an article called “IMF struggles to conceal glee“:
Though International Monetary Fund officials try to conceal their excitement at the thought of another country sliding towards financial disaster, there is no doubt that leading a rescue effort for Greece will be an enormous prize. ..
A severe tightening in fiscal policy remains as the sole means of returning it to solvency and stability, recalling the old saying that IMF stood for “It’s Mostly Fiscal.”
The story didn’t quote any IMF sources substantiating the “glee” factor, but based on what one insider tells me, the FT story perfectly sums up the mood in the upper-echelons of “The Fund.”
“The article is spot on,” an IMF employee told me on condition of anonymity today. “I wont lie to you, it’s absolutely on the money. Hats off to the author.” Amused by its accuracy, the source said the headline was just “too good.”
(If you’re just tuning in, Greece has suffered a calamitous financial plunge threatening to utterly bankrupt the nation, and is facing over 10 percent adjusted unemployment — a figure that would be higher absent the country’s powerful labor unions.)
Meanwhile, CEPR co-director Mark Weisbrot explains in The Guardian why the IMF is often seen as “doing more harm than good” — though he does praise the organization for taking some positive steps in recent years.
In the last few years, the IMF has continued with a long-held double standard: it supports counter-cyclical policies – ie expansionary fiscal and monetary policies during a downturn – for the high-income countries, but not so much for low and middle-income countries.
The fund is currently squeezing Ukraine, for example, to reduce its spending, and suspended its disbursement of funds to the government in order to force budget tightening.
While it’s fair to argue that counter-cyclical policies are tougher to implement effectively in developing countries with unsound political and economic institutions, it’s no less fair to conclude that contractionary monetary and fiscal measures simply make things worse.
The obvious goal is to cut government waste, fraud and money laundering — but those phenomena tend to stay, while helpful programs that benefit the least well-off are usually the first to go in periods of budget-tightening.
All that said, it’s anybody’s guess how to successfully impel fragile third-world governments to slash waste, rebuff cronyism and spend money on worthwhile programs. If any of you figure that one out, give me a call.