IMF watchdog critical of Fund’s handling of Greek programme, Euro crisis

The International Monetary Fund (IMF) came under fire from its own watchdog – the Independent Evaluation Office – in a report issued on Thursday about the Fund’s handling of the bailout programme in Greece and other euro area countries.

Among others, the IEO referred to a “patchy” performance in the handling the Eurozone bailouts and criticised “overly optimistic growth projections,” especially in the case of Greece. The independent watchdog also said the IMF’s leadership had allowed the judgements of its technical staff to be subjected to political pressures from an early stage, due to the troika arrangement, while the handling of the euro area crisis “raised issues of accountability and transparency, which helped create the perception that the IMF treated Europe differently.”

In a statement responding to the report, IMF Managing Director Christine Lagarde said the programme for Greece, as opposed to those in Portugal, Ireland and Cyprus, had been a special case.

“Greece, however, was unique: while initial economic targets proved overly ambitious, the programme was beset by recurrent political crises, pushback from vested interests, and severe implementation problems that led to a much deeper than expected output contraction.

“On the other hand, Greece undertook enormous adjustment with unprecedented assistance from its international partners. This enabled Greece to remain a member of the euro area – a key goal for Greece and the euro area members,” she said.

The report noted that Greece had benefited from the significant debt haircut in 2012, as well as a refinancing on very favourable terms from its official creditors and the IMF. It repeated the IMF’s position for further significant debt relief for Greece. It noted that a decision to provide exceptional access financing to Greece without seeking preemptive debt restructuring, even though its sovereign debt was not deemed sustainable with a high probability, was made to avert the risk of contagion.