The mess made of Greece must never be repeated
Last week the IMF admitted it had been too sanguine about the devastation austerity would wreak on Greece and that some of the measures forced on Athens in return for its emergency loans had been wrong… Looking at the first of the three austerity packages the IMF and Europe imposed on Greece,the report admits that the troikas optimism over how the economy would react to austerity was disastrously wrong… Amid epochal crisis,Greeks wouldnt have avoided economic and social dislocation but the policies thrust on them heightened the suffering. The troika underestimated the impact that cuts and tax rises would have on the economy; it failed to foresee the consequent collapse in business confidence,and the further ruination of the loans extended by Greek banks.
Early on in the crisis,this paper argued for a rapid writedown or even default on the debt owed by the Greek state coupled with measures to insulate European banks from the shockwaves that would immediately follow. Instead,Greece was lent money to keep repaying the interest on its loans to banks and hedge funds,even while its people starved. Now the Fund concedes that early debt-restructuring would have been best but says that it had been ruled out by the euro area by officials and politicians who were not up to the job of crisis management.
From a leader in The Guardian,London