"A matter of honour" to admit errors says IMF head, “troika’s demands unacceptable” says EU Parliamentarian

Managing Director of the International Monetary Fund (IMF) Christine Lagarde said yesterday that it was a “matter of honour” that the organisation acknowledge errors it had made in its handling of the Greek fiscal crisis. Ms Lagarde made the comments speaking to the European Economic and Social Committee (EESC) in Brussels.

Specifically she said that the IMF had made incorrect predictions regarding the “fiscal multipliers” in Greece. In other words, it had underestimated the impact that austerity policies would have on the Greek economy leading to a much deeper recession in the troubled country than expected.

Ms Lagarde reportedly attributed the error to a lack of related expertise adding, however, that even if the fiscal multipliers had not been underestimated, the IMF’s basic policy recommendations would have been the same but given a longer timeframe for implementation.

Ms Lagarde also highlighted the danger posed by high youth unemployment on Europe’s economic future. Youth unemployment in Greece is over 50%.

According to a press release by the EESC, during the meeting the committee’s president Henri Malosse praised Ms Lagarde for her statements several months ago acknowledging the ‘importance of not sacrificing growth to austerity policies.’ Mr Malosse also added, “If we go further down the path of austerity, we risk undermining the social pact and endangering democracy. Is now not the time, for example, to restructure certain public or private debt?”

Meanwhile Greece’s lenders came under fire from the leader of the European Parliament's Progressive Alliance of Socialists and Democrats, Hannes Swoboda, who launched a scathing attack against the ‘unacceptable demands’ being made by the troika on the country.

He made the statements during a conference in Strasbourg, saying that despite Athens showing “very good will and very good reforms,” its creditors were making demands that had “nothing to do with the reform project,” and were preventing Greece from reaching an agreement with the troika over the disbursement for the next € 1 bln tranche in bailout loans to the country, and a possible lightening of the country’s debt load, something which many analysts see as unavoidable.

Referring to the demand by the troika that the ban on auctions of foreclosed homes be lifted, Mr Swoboda said, “”The troika is making unacceptable, socially unacceptable, demands, for example that citizens who cannot pay back the credit on their houses because of lack of income, because of unemployment, should be thrown out of their houses and their flats.”

“It's absolutely crazy that the European Commission is demanding that European citizens are thrown out of their houses if they can't pay back because of the economic and social crisis the credit on their homes. This has nothing to do with the reform project in Greece, which is going its way. Not everything has been done but many, many steps have been done already,” Swoboda added.

In criticism directed primarily at European Commissioner for Economic and Monetary Affairs Olli Rehn, the MEP also said that not enough had been done to make the reform program more socially acceptable in Greece, noting that the more interviews the Commissioner gave, the more euro-scepticism rose in the crisis-hit countries.

Mr Swoboda implied that this was because Mr Rehn was seeking to boost his image as a hardliner in creditor countries saying “It is difficult to decide whether the things he says, he says as Commissioner or as a candidate for the Presidency of the Commission.”