Olivier Blanchard Defends IMF Policy in Greece

In a Vox blog post, Olivier Blanchard addresses four critiques against the IMF’s engagement in Greece. He argues that

  • the 2010 program did help Greece; without it, Greece would have undergone much harsher “austerity;”
  • the financing given to Greece did not only benefit foreign banks; the 2012 PSI amounted to debt relief on the order of 10’000 Euro per capita;
  • “[m]any … reforms were either not implemented, or not implemented on a sufficient scale … [m]ultipliers were larger than initially assumed … [b]ut fiscal consolidation explains only a fraction of the output decline”;
  • conditionality also reflects political constraints on the part of the lender countries.

Olivier sees the Fund on the sidelines, in particular after Greece’s default against the IMF:

The role of the Fund in this context is not to recommend a particular decision, but to indicate the tradeoff between less fiscal adjustment and fewer structural reforms on the one hand, and the need for more financing and debt relief on the other.