The IMF on their Greek bailout: We’ve made a huge mistake

posted at 7:21 pm on June 5, 2013 by Erika Johnsen

More bad news: Germany’s economy, responsible for almost a third of the eurozone’s collective output, has been one of the few relative — and I do mean relative — bright spots in the black hole of contraction that has been the eurozone’s economic performance for six straight quarters. They managed to just barely get their first-quarter economic growth above zero, and earlier this spring the IMF projected an upcoming 0.6 percent growth rate — still a heartbreaking stagnation rate, but at least it was something… except that the IMF just readjusted their estimate once again. Downward.

The IMF said falling business investment and the eurozone’s ongoing recession, which have hampered German growth, meant the economy would grow by just 0.3pc this year, compared with an April estimate of 0.6pc.

“The uncertainty, mainly surrounding prospects for the euro area and the ongoing recession in the region, have led to declining German exports to the region as well as a sharp pull back in business investment,” the IMF said in a report on Monday.

The Fund also warned of further risks to Germany’s growth prospects. “Should the alleviation of uncertainty and an expected gradual recovery in the rest of the euro area fail to materialise, growth can be expected to remain below its potential for longer, leading to a widening of the output gap which would eventually result in slack in the labour market,” it said.

From whence this ‘expected’ gradual recovery in the rest of the eurozone is supposed to materialize, I have no idea — especially since the IMF also just admitted that they have probably been mishandling the first domino that knocked the whole thing down from the very beginning. The WSJ reports:

BRUSSELS—The International Monetary Fund has admitted to major missteps over the past three years in its handling of the bailout of Greece, the first spark in a debt crisis that spread across Europe.

In an internal document marked “strictly confidential,” the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece’s economy, which has been mired in recession for the last six years.

The IMF conceded that it bent its own rules to make Greece’s burgeoning debt seem sustainable and that, in retrospect, the country failed on three of its four criteria to qualify for aid. …

The IMF report said that it had been too optimistic in 2010 about the Greek government’s prospects for a return to market financing and its political ability to implement the conditions of its rescue program.

Worse and worse.


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NSS- No Sheet Sherlock

Galt2009 on June 5, 2013 at 7:24 PM

Well at least the IMF and the Germans have the eternal gratitude of the Greeks for all their help. LOL

cynccook on June 5, 2013 at 7:27 PM

Liberalism, meet reality.

Paul-Cincy on June 5, 2013 at 7:27 PM

It’s not a bailout… it’s an illusion!

JackForce on June 5, 2013 at 7:33 PM

Gee, figure that–they made a “huge mistake.”

Earth, more importantly USA citizens, to the IMF: YOU are “the huge mistake.”

jersey taxpayer on June 5, 2013 at 7:35 PM

A weak Europe means less exports for us too…

WitchDoctor on June 5, 2013 at 7:35 PM

But what is the article actually saying? That the austerity plan is what killed Greece, and that they should have been nicer to them?

Outlander on June 5, 2013 at 7:36 PM

Yeah – I went back and read other articles on the subject. Basically what they’re saying is that the REASON why IMF screwed the pooch was on insisting that Greece cut its spending. They basically said austerity killed them, and what they should have done instead is to have required the private bondholders of Greek debt to eat the losses instead of Greek citizens.

If that’s true, then basically IMF is saying that Obama’s right (spend more, don’t cut the budget) and Republicans are wrong.

Outlander on June 5, 2013 at 7:39 PM

the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece’s economy,

Guess “austerity” doesn’t work. To quote a famous American Vice President: “Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that’s what I’m telling you.”

Common you IMF Pantywaists… start spending!

Hill60 on June 5, 2013 at 7:44 PM

My own brother. Michael. My own selfish brother. Michael. Selfish Michael. #HugeMistake

Guy Benson on June 5, 2013 at 7:46 PM

Hill60 on June 5, 2013 at 7:44 PM

Common Come on

Hill60 on June 5, 2013 at 7:46 PM

From whence this ‘expected’ gradual recovery in the rest of the eurozone is supposed to materialize, I have no idea

It’s the “green shoots”! Can’t you see them? They’re right there … and they’re green!!

ThePrimordialOrderedPair on June 5, 2013 at 7:49 PM

Come on you IMF Pantywaists… start spending!

Hill60 on June 5, 2013 at 7:44 PM

With what? They’ve run through other people’s money.

Happy Nomad on June 5, 2013 at 7:51 PM

Bail outs are seldom the answer, I’m amazed they admit it.

Cindy Munford on June 5, 2013 at 7:51 PM

In related news…giving Moochelle unlimited taxpayer lobster hasn’t improved her scowl, waistline or attitude.

viking01 on June 5, 2013 at 7:51 PM

My own brother. Michael. My own selfish brother. Michael. Selfish Michael. #HugeMistake

Guy Benson on June 5, 2013 at 7:46 PM

LOL

cynccook on June 5, 2013 at 7:52 PM

It’s the “green shoots”! Can’t you see them? They’re right there … and they’re green!!

ThePrimordialOrderedPair on June 5, 2013 at 7:49 PM

Sorry, I wasn’t paying attention what with Recovery Summer IV beginning to bloom.

Happy Nomad on June 5, 2013 at 7:52 PM

In related news…giving Moochelle unlimited taxpayer lobster hasn’t improved her scowl, waistline or attitude.

viking01 on June 5, 2013 at 7:51 PM

Hey that lesbian deserved to be yelled at!

Happy Nomad on June 5, 2013 at 7:54 PM

Bail outs are seldom the answer, I’m amazed they admit it.

Cindy Munford on June 5, 2013 at 7:51 PM

Sadly, they’re only regretting putting any conditions (like budget cuts — “austerity”) on the bailout. Some people will never learn.

cynccook on June 5, 2013 at 7:54 PM

Bail outs are seldom the answer, I’m amazed they admit it.

Cindy Munford on June 5, 2013 at 7:51 PM

Actually, I think IMF is saying that a more traditional bailout (basically have Greece default on its bonds and have more of that debt “erased” so it can start afresh with more reckless spending) would have worked better.

Outlander on June 5, 2013 at 7:55 PM

Don’t forget, Greece begat the Cypriot bank account seizures.

Steve Eggleston on June 5, 2013 at 7:55 PM

Outlander on June 5, 2013 at 7:39 PM

Did Greece participate in actual “austerity,” as it might be understood in America, or not?

No, they didn’t.

Leftists will cry day and night about how “austerity” didn’t work but it’s a false premise.

visions on June 5, 2013 at 7:58 PM

What they are really saying is:
Greece is really a third-world country that is so beyond bankrupt that absolutely nothing could help it and Greece should have been kicked out of the EURO and possibly the EU.

Kiss all that money wasted on Greece good bye!

albill on June 5, 2013 at 7:58 PM

Leftists will cry day and night about how “austerity” didn’t work but it’s a false premise.

visions on June 5, 2013 at 7:58 PM

Yes, but in all fairness to the Greeks, they found even discussions about austerity to be very hurtful and distressing…

Rioters set fire to buildings and battled police in downtown Athens as the Greek Parliament prepared to vote on Prime Minister Lucas Papademos’s austerity package to avert the nation’s collapse.

cynccook on June 5, 2013 at 8:01 PM

It’s the “green shoots”! Can’t you see them? They’re right there … and they’re green!!

ThePrimordialOrderedPair on June 5, 2013 at 7:49 PM

Sorry, I wasn’t paying attention what with Recovery Summer IV beginning to bloom.

Happy Nomad on June 5, 2013 at 7:52 PM

Heh. What do you think they’re going to try to call it next? “Economic Warming” or straight to “Economic Change”? Yeah … why the hell not :)

ThePrimordialOrderedPair on June 5, 2013 at 8:07 PM

and I do mean relative — bright spots in the black hole of contraction

Erika, there’s a Dallas councilman that would like to have a talk with you about using this racist term.

RickB on June 5, 2013 at 8:07 PM

Well ain’t REALITY a bitch!

GarandFan on June 5, 2013 at 8:11 PM

Outlander on June 5, 2013 at 7:55 PM

I am one of the few who thinks that TARP was a disaster, people should have failed and people should have gone to jail. Those folks were going to protest regardless.

Cindy Munford on June 5, 2013 at 8:13 PM

Hey that lesbian deserved to be yelled at!

Happy Nomad on June 5, 2013 at 7:54 PM

Was Moochelle “wearing the pants” in that brusque altercation or the heckler?

viking01 on June 5, 2013 at 8:23 PM

Somehow, I don’t think “oops” quite covers it.

And now they’re saying that asking Greece to stop spending money they didn’t have wasn’t a good option?

And oh yes, Germany (aka The Country That Nobody Says No To) has almost the only liquidity left on the Continent.

I think the gnomes in Brussels need to remember exactly how a certain country’s Army traditionally starts a summer road trip to the Channel coast.

Hint; Eupen, Belgium is on the Belgian border with that country. And could quite legitimately put up a sign saying

Welcome to Eupen

Gateway To France

<- Paris Is This Way

In Deutsche, naturally.

clear ether

eon

eon on June 5, 2013 at 8:40 PM

And this wasn’t just buying her dinner at some mid-range steakhouse, you schmuck. No, Mr. Big-Shot, you go and write a check for six months rent. Heck, you haven’t even gotten a “handie”. You haven’t even been invited in to take a leak before you schlep home after “a lovely evening.”

M240H on June 5, 2013 at 8:49 PM

they should go back to the drachma

gerrym51 on June 5, 2013 at 10:31 PM

BIGGEST WINNER:

NIGEL FARAGE

NIGEL FARAGE

NIGEL FARAGE

Oh I can’t WAIT for his next EU rant….should be EPIC!!!!!!

LordMaximus on June 5, 2013 at 10:57 PM

With what? They’ve run through other people’s money.

Happy Nomad on June 5, 2013 at 7:51 PM

They will seize more of the “little people’s” bank accounts. When that happens you have collapse.

dogsoldier on June 6, 2013 at 5:51 AM

Hey Germany, why don’t you try austerity and encourage Greece to spend more? Greece will come roaring back, buying all those cheap German cars and they’ll pay you back with all their new spare cash!

BTW, the IMF forgets to attribute some of the slow growth to the effects of “Climate Change” and the sorry lack investment by developed countries in technologies that imperceptibly reduce atmospheric CO2.

Were it not for these mistakes, the EU would be growing at 5%+, while expanding government benefits and extending paid vacations for the world’s most productive workforce.

/sarc

virgo on June 6, 2013 at 8:15 AM

Happy Nomad on June 5, 2013 at 7:51 PM

Print some more – duh!

Hill60 on June 6, 2013 at 10:40 AM

If that’s true, then basically IMF is saying that Obama’s right (spend more, don’t cut the budget) and Republicans are wrong.

Except that it’s absolute baloney.

The reason they went the austerity route in the first place was in order to try to avoid bondholder losses. Why? Because Greek bonds would have nose-dived to junk and investors would have avoided the country like it was an economic Fukishima.

Which is precisely what should have happened.

The lesson that the IMF should have learned from this is simple: no matter how much Lefties try to legislate away reality, the laws of economics eventually win…everytime.

rvastar on June 6, 2013 at 11:03 AM

Well, that’s certainly unexpected.

FineasFinn on June 6, 2013 at 11:49 AM