International Monetary Fund executive director Paulo Nogueira Batista admitted that the institution has had “mixed” results with its policies in both Europe and developing countries and that programs in Greece and Ukraine in particular have been a “failure,” he said in an interview with RT on Friday.
Batista pointed to Ireland and Portugal as “success stories” in the Eurozone for being able to pay off their debts on time and mitigate a crisis.
Ukraine and Greece, on the other hand, have struggled through “unsuccessful programs,” creating what Batista referred to as “very difficult” cases that could be described as “failure.”
“I think the Greeks are suffering a lot from a lot of misguided decisions that were taken, not only by the IMF but by previous Greek governments, by European authorities that led Greece into a serious impasse out of which it has not been able to emerge yet,” said Batista to RT.
Carrying a crippling US$364 billion in debt, Greece is currently running out of time to strike a deal with creditors to avoid defaulting on US$1.8 billion in IMF loans due to be paid off at the end of June, the first in a series of payments.
Meanwhile, Ukraine's debt burden of US$50 billion has also created budgetary challenges and forced government restructuring to attempt to pay lenders.
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“Ukraine has had as many as three unsuccessful programs – 2008, 2010, 2014 – and it is now executing a fourth program with the IMF,” said Batista. “The record of the IMF is mixed.”
On the topic of austerity, Batista said the issue needs to be approached with “qualifiers,” saying fiscal austerity is an important principle, but history has shown that austerity measures can by more harmful than helpful to failing economies.
“Some studies of the fund itself have shown that economists, including fund economists, in the past have underestimated the multiplier effects of fiscal austerity in economies that are in a downturn,” Batista explained. “So this has to be handled very carefully because you may be doing in theory something that is important but in practice sinking the economy into recession, and undermining the fiscal effort itself.”
Widespread calls for an end to austerity have come from social movements across Europe, from Greece, Spain, the U.K., and beyond.
But Batista said the IMF is an old institution responding “rather slowly” to a “rapidly changing world.”
Looking beyond Europe and the success or failure of attempts to keep EU member states afloat, Batista also acknowledged the IMF's patchy and even destructive history in the global South.
“The record of the IMF in its interventions in developing countries is mixed,” said Batista, citing examples that the IMF “can do good” by providing emergency financing to allow countries “time to adjust” to sudden changes. “But it is also true that the IMF is sometimes distorted in its actions by the unequal governance structure that the institution has,” he added.
“It is incumbent upon the West to be clear about the fact that if they abuse their power in the World Bank, in the IMF, this will weaken the institutions that they created...and will not, in the end, be useful for the United States and Europeans.”
Batista also called for critical rethinking of the institution's governance and voting power structure as key reforms needed by the IMF.