IMF admits ‘failures’ in bailout of Greece

WASHINGTON - The Associated Press

Medical staff taking part in a protest rally against austerity in Athens are seen in this file photo. The bailout measures has spurred social unrest as well.

The International Monetary Fund acknowledged that it made “notable failures” in the Greek bailout, underestimating how much the austerity measures it pushed would pinch the country’s already faltering economy.

The IMF made the unusually frank admission in an evaluation of the Greek crisis over too much government debt, which broadened out to infect other European countries.

The Greek economy has been kept afloat for the past three years by rescue loans from Europe and the IMF in exchange for harsh austerity measures that have worsened the recession, currently in its sixth year. It has so far received about 200 billion euros ($258.8 billion) in loans from a rescue program totaling 240 billion euros ($310.5 billion).

While the measures have reduced Greece’s budget deficit, they have left the country mired in a much deeper recession than what the IMF and its European partners in the bailout forecast three years ago. Unemployment is 27 percent.

The report said the IMF and its partners in the bailout had significantly underestimated a key measure of how much austerity measures, such as spending cuts and tax increases, would impact the economy. However, the fund insisted that it could not have slowed the pace of belt tightening.

In another misstep, it said Greece missed three of the IMF’s four main criteria required to qualify for such bailouts. On one of the criteria, debt sustainability, the IMF has asserted repeatedly that Greek government should be able to fully repay its debt burden on time. However, the report said there was much uncertainty surrounding this assertion.