Crisis in Greece
Sir, – Brigid Laffan’s argument (Opinion, February 15th) that Greek austerity should be overseen by the IMF and not the EU misses three key points.
First, it is wrong to suggest that the burden of adjustment should be borne by Greece alone – much of the Greek debt arises from dubious sources, including bloated weapons purchases from, among others, Germany and corrupt construction contracts for the Olympic Games and other events. Greek campaigners are conducting an audit of the country’s debt to determine its legitimacy (or the likely lack of it). The savage cutbacks being inflicted on Greek society, whether imposed by the EU or the IMF, cannot be justified if a significant portion of the debt is illegitimate to begin with.
Second, the record of the IMF in the “Third World”, during the 1980s and 1990s especially, should give pause for thought.
For example, in South Korea, an IMF-led adjustment programme in the late 1990s saw government spending slashed, despite the fact that government over-spending had not caused the crisis there; between 1996 and 1999, South Korea’s unemployment rate tripled and the proportion of the population identifying themselves as middle class fell from 64 per cent to 38 per cent.
As for IMF “experience and expertise”, the institution’s own Independent Evaluation Office last year issued a report that condemned
“the IMF [for having] praised the US for its light-touch regulation and supervision that permitted the rapid financial innovation that ultimately contributed to the problems in the financial system. Moreover, the IMF recommended to other advanced countries to follow the US/UK approaches to the financial sector”.
Third, the involvement of the IMF is claimed to be justified because “Germany as the largest and most powerful member state is bearing the brunt of the odium”. But if Germany (or, more specifically, the German leadership and that of other core countries) is responsible for pauperising Greek society to protect the European financial system, then is not odium wholly merited? – Yours, etc,