IMF had doubts about Greek bailout

Almost a third of the International Monetary Fund’s (IMF) members raised doubts about the effectiveness of the Greek bailout at the meeting in which they agreed the deal on May 9, 2010. They criticised the plan for failing to include a debt writedown and passing the “painful adjustment on the Greeks while asking nothing of its European creditors,” writes the Wall Street Journal.

The financial daily, which has received a raft of confidential minutes from a meeting of the IMF’s Executive Board, reveals that contrary to public statements that it had no doubts about the bailout plan, a host of nations expressed concerns over the “immense risks” of the rescue package, reports the newspaper.

The leaks emerge ahead of the annual IMF meeting in Washington DC on October 11 and as the Fund ratchets up the pressure on European governments to forgive some Greek debt or risk losing IMF support for future bailouts. In June, the IMF admitted failures in its handling of the Greek rescue.

The Wall Street Journal writes that this IMF insistence stems from “bitterness” felt by many non-European member countries over negotiations at a 2010 meeting to approve the controversial deal, which included tax rises and huge public spending cuts for Greeks, but included no debt restructuring:

Some of the IMF dissenters at the meeting and some IMF staff believe the interests of the European powers were placed above those of Greece, which has seen its economy contract by a fifth since 2009 and its jobless rate reach nearly 28 per cent.

The minutes report some European member countries said debt restructuring was not included in the Greek bailout over fears that the contagion would spread to other countries such as France and Germany.