IMF Admits It Is An Idiot And A Liar

Tyler Durden's picture

The topic of the IMF's idiocy - unquestioned here following years and years and years of absolutely horrific forecasts, not to mention charts like this one courtesy of the Troika, of whom the IMF is a proud member ...

... has been widely covered in the past. However, while in the past we have attributed to stupidity all the faults of the Angela Mozilla Christine Lagarde-headed organization, we never had the factual backing to also invoke malice, lies and manipulation. Now, we can.

According to a leaked "strictly confidential" document first obtained by the WSJ, "The International Monetary Fund is set to admit to major missteps over the past three years in its handling of the bailout of Greece, the first spark in a debt crisis that spread across Europe."

In an internal document marked "strictly confidential," the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece's economy, which has been mired in recession for years.

 

But the fund also stressed that the response to the crisis, coordinated with the European Union, bought time to limit the fallout for the rest of the 17-nation euro area.

 

The IMF said that it bent its own rules to make Greece's burgeoning debt seem sustainable and that, in retrospect, the country failed on three of the four IMF criteria to qualify for assistance.

 

Over the last three years, a number of senior IMF figures, including the current managing director Christine Lagarde, have repeatedly said that the country's debt level was "sustainable"—likely to be repaid in full and on time. But the document described the uncertainties around the Greek rescue as "so significant that staff was unable to vouch that public debt was sustainable with a high probability."

...

The greater beneficiary of the 2010 bailout wasn't so much Greece as the wider euro-zone, the document suggested. It described the rescue as a "holding operation" that "gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy."

 

An immediate restructuring would have been cheaper for European taxpayers, as private-sector creditors were repaid in full for two years before 2012 using the money borrowed by Athens. Greece's debt level thus remained undented, but it was now owed to the IMF and euro-zone taxpayers instead of banks and hedge funds.

 

The IMF also said its own analysis of the future development of debt was wrong "by a large margin." The fund's debt-sustainability analysis—a critical piece of forecasting—"included stress tests but these turned out to be mild compared with actual outcomes."

 

The fund didn't explain why it made the choices it did in detail, nor why it agreed to troika analyses that it now says were incorrect. But it said IMF staff "explicitly flagged" risks in the Greek program implementation.

In other words, as we claimed from the very beginning, Greece was nothing but a scapegoat to preserve the viability of the otherwise doomed Eurozone, with over three years of harsh terms imposed merely to keep the crisis contained and from spilling over to Europe proper, and instead of restructuring debt early on or allowing Greece exit from the EUR so the country could undergo an external Drachma-based rebalancing, the clueless organization just "made things up" as it went along all with one simple goal: shield Brussels from reality.

In order to achieve this, the IMF manipulated data, always coming up with "rosy" forecasts, even though all "reforms" in Greece failed and have continued to fail to this day.

Our take: this is merely the mea culpa the precedes yet another major negative inflection point for Europe, and whose job is to give the ECB carte blanche to engage full-blown, unsterilizied QE, whose consequences will be even more disastrous in the longer-term.

In short - Europe is finally returning to its rightful place that we all know and love: the brink.