In bad faith

Ashoka Mody, Visiting Professor at Princeton University and former Deputy Director in the IMF’s Research and European Departments, critiques the IMF report published on 2 July, on the eve of Greece’s referendum. This report found that Greek debt was not sustainable and deep debt relief along with substantial new financing was needed to stabilize Greece. This report, according to Mody, reveals that the creditors negotiated with Greece in bad faith. He suggests that the Greek debt burden is much greater than portrayed by the report, and that the policy measures proposed to reduce that burden, including more austerity, will make matters worse. This article was first published on bruegel.

On 2 July, the IMF released its analysis of whether Greek debt was sustainable or not.  The report said that Greek debt was not sustainable and deep debt relief along with substantial new financing were needed to stabilize Greece. In reaching this new assessment, the IMF stated it had learned many lessons. Among them: Greeks would not take adequate structural reforms to spur growth, they would not sell enough of their assets to repay their debt, and they were unable to undertake sufficient fiscal austerity. That left no choice but to grant Greece greater debt relief and to provide new financing to tide Greece over till it could stand on its own feet. The relief, the IMF, says must be provided by European creditors while the IMF is repaid in whole.

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