As the office of the International Monetary Fund in Greece prepares to close, its first chief, Bob Traa, shares his thoughts with Kathimerini about the Fund’s contribution to the Greek bailout and reform process, saying that more and bolder interventions were required, and that the necessary sacrifices should have been better communicated to the people.
The Dutch official explains that the choice of the IMF to help streamline the Greek economy in 2010 was ideal: “The IMF has ample experience with program countries and with difficult adjustment efforts. This experience proved very helpful at the beginning in 2009-2010, because the surveillance over Greece in the 2000s was too loose,” Traa argues.
“The great risks presented to sustainability in Greece by the growing imbalances in the economy were not recognized – this only came when it was already too late; after the financial crisis began and the US pulled the rug out from under the Euro economy, including Greece. Thus, the methodology and approach, and the cautious outlook presented at that time, were helpful,” he tells Kathimerini.
Traa shakes off criticism of a heavy-handed approach by the Fund: “The IMF was consistently the most cautious party in the multilateral teams working with Greece for quite some time. Unfortunately, even that proved to be too optimistic. In short, I believe that a strong approach to the serious problems in Greece was warranted, despite the many criticisms that this received, and continues to receive in hindsight.”
He goes on to claim that the main problem was the poor explanation of the program to the public: “There were shortcomings in the program(s), including from the IMF. My most vexing one is that communication with the broader public was never well established. I had remarked to the authorities already at the beginning that Greece was passing through a structural recession, not a vanilla business cycle, and that structural reform could take one or two decades to play out. This caused some consternation among the authorities, who were understandably afraid of such a long time period – this is politically almost undoable. But here we are a decade later and the economy is only now starting to recover,” he says, before concluding: “If we had been able to have a more open and transparent discussion with a broader set of people inside Greece, then I think that this would have been difficult but helpful.”