By Dr Paroutis, Warwick Business School
A public recognition of mistakes by the IMF has positives as it shows willingness to be more transparent about the fund’s processes and could potentially result, in the long-term, in improved collaboration with European institutions.
However, the inevitable question is whether raising these issues at this point in time is detracting from efforts to deal with the issues the Greek economy is still facing. Already, European Union officials have openly questioned parts of the IMF report, while there is an avalanche of criticism by political parties and the media in Greece.
One of the key issues the Greek economy and the Greek people face daily, despite years of austerity, is unemployment. The official rate of unemployment is 26.8% for March 2013 compared to 11.5% two years ago, with 58.3% in 15-24 year olds from 31.2% in March 2010. There are some ‘green shoots’ though, with the IMF report recognizing that several recent developments, for instance in restarting infrastructure projects and in increased tourist activity (tourist arrivals expected to reach 17 million in 2013) point to signs of economic recovery.
This will be welcome news to international investors seeking new growth opportunities, particularly in transport and tourism-related industries; and in relatively stable conditions as Greece has the commitment of its European partners for further economic relief in 2014-2015. If planned carefully, these investments could make a real difference to the Greek economy, as the country now needs more growth-enhancing initiatives rather than one-dimensional deficit reduction efforts.
The IMF report points to mistakes in the way the first Greek bailout in May 2010 was handled and suggests the need to refine the Fund’s lending policies to accommodate for conditions in monetary unions. It also points to differences of view with the other Troika members. Such mistakes and differences of view are not new or unexpected, especially when dealing with such multi-dimensional and complex issues, as is the effort to deal with the Greek debt.