A miserable failure of the IMF prescription

THE FIGURES disclosed by the Hellenic Statistical Authority last month show the complete failure of the International Monetary Fund (IMF) prescription for Greece, resulting in a rapid increase in inflation, but also a reduction in the revenues.

So, annual inflation in July rose to 5.5 percent from 5.2 percent in June 2010 and 0.6 percent in July 2009, now returning to 1997 levels! In addition, state revenues in July decreased by 10 percent overall and Value-Added Tax (VAT) returns by 5 percent, despite the fact that all indirect taxes have increased.

It has now become evident to the government and the IMF that high prices are plaguing Greek households, which have undergone, due to the recent measures, a violent reduction in their earnings of at least 30 percent. At the same time, according to data from the Institute of Labour of the General Confederation of Greek Workers (GSEE), unemployment is expected to reach 20 percent, which would mean that the number of unemployed will surpass one million by the end of the year.

What is happening, of course, is not a bolt from the blue. It was expected because of the neoliberal prescription of IMF imposed through the Memorandum of Understanding as a so-called one-way out of Greece’s economic troubles.

IMF invited in

The IMF came to Greece mid-January, when it sent a delegation, at the invitation of Prime Minister George Papandreou, to offer so-called technical assistance. Since then the IMF has become a dominant presence in the political and economic life of the country. With the European Commission, it has also been responsible for the first package of austerity measures announced by Papandreou on March 2. In the course of things, the IMF got even more involved in Greece through the memorandum, which is known as a three-year plan of supposed consolidation of the Greek economy so as to reduce deficits and debts – but which, in fact, aims to rescue the lenders of Greece, as Ambrose Evans-Pritchard, international business editor at The Telegraph writing frequently on Greece, pointed out on April 11.

Neoliberal philosophy

The memorandum imposed on Greece by its lenders was based on the neoliberal policy of the IMF. A key element of this policy is the application of austerity measures by drastic reduction of public spending.

In this context, layoffs and staff reduction as well as cuts in wages and pensions are being forced onto the public sector, along with demolition of the welfare state, deregulation of tariffs for public utilities and privatisation of profitable public utilities.

In the private sector, deregulation of work relations, abolition of collective bargaining and reduction of wages and pensions are also imposed in a forceful way.

This IMF prescription has, of course, been well known for many years. In the case of Greece, it was clearly prescribed in the relevant reports IMF had been drawing up every year.

But what the IMF had not factored in was the surge in inflation, which has upset its plan. As the daily Kathimerini newspaper has pointed out, the IMF now forecasts that inflation in Greece will reach an average of 4.75 percent for 2010 from 1.9 percent originally forecast, primarily due to higher indirect taxes.

Therefore, what was initially presented like a remedy to the Greek economy now looks like a nightmare.



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