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The IMF underestimated the damage that fiscal austerity would do to the Greek economy in its earliest rescue of the nation in 2010. It was too slow to promote a write-down of the nation’s debts to more sustainable levels. And it was compromised by a sometimes unwieldy partnership with major European institutions in what became known as the “troika.”

The IMF could have handled its 2010 bailout of Greece quite a bit better, a staff review found. (Louisa Gouliamaki)

The result of these “notable failures,” enumerated in an “Ex-post evaluation” that the IMF published Wednesday, is the depression-stricken nation that is Greece today. The nation’s unemployment rate is 27 percent and economic activity remains well below its levels of half a decade ago.

so lets see more below the fold.

“Market confidence was not restored, the banking system lost 30 percent of its deposits, and the economy encountered a much-deeper-than-expected recession with exceptionally high unemployment.” Public debt remained too high, Greece waited too long to restructure its debt, and “structural reforms stalled and productivity gains proved elusive.”

Back in 2010, IMF staff had believed that spending cuts by the Greek government would have a multiplier effect of only 0.5 percent as less government spending was offset by more economic activity elsewhere. They now think the multiplier is twice that, given Greece’s situation.


That multiplier thing is a big one.

Ideology said "There is no value to public sector spending, when it reality there was a big value to it.

The math is quite simple: Simultaneously choke off government spending and raise taxes, and you crimp the economy reduce job creation and hurt tax revenues — creating an even bigger deficit.

To fix a chronic deficit, you need to make the economy grow faster . . .

the austerians have damaged all of europe now they want to try one more time over here

Originally posted to patbahn on Thu Jun 06, 2013 at 09:28 AM PDT.

Also republished by In Support of Labor and Unions.

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