The International Monetary Fund, one of Greece’s three official foreign creditors, has admitted in a new working paper that it overestimated the impact of austerity in Greece and the prospects for growth in the recession-hit country.
In a 31-page document entitled «Assessing the Impact and Phasing of Multi-year Fiscal Adjustment: A General Framework,» IMF officials claim that an incorrect so-called fiscal multiplier was not the key reason behind a deepening recession in Greece. Rather, the agency overestimated the prospects for growth in a country where the economy contracted some 25 percent in four years.
The IMF paper places some of the blame on a succession of Greek governments for failing to efficiently implement reforms faster, noting that political upheaval and social unrest also undermined hoped-for results.
The report, which examines the impact of IMF-backed economic reform programs in several countries, refers to “weaker than anticipated program implementation and payoffs from reform, political and social dislocation” in Greece.
The IMF, together with the European Commission and the European Central Bank, have granted Greece two loan programs worth 240 billion euros, since 2010. However a dispute surfaced in recent months between the IMF on the one hand and the EC and ECB on the other about how Greece’s debt burden should be tackled.