Whitewashing the IMF’s Destructive Role in Greece

Written on September 2nd, 2015 in politics Comments Off

Published on Counterpunch, by MICHAEL HUDSON, Aug 31, 2015.

This autumn may see anti-austerity coalitions gain power in Portugal, Spain and Italy, while Marine le Pen’s National Front in France presses for outright withdrawal from the eurozone. These countries face a common problem: how to resist the economic devastation that the European Central Bank (ECB), European Council and IMF “troika” has inflicted on Greece and is now intending to do the same to southern Europe.  

To resist the depression and debt deflation that the troika seeks to deepen, one needs to bear in mind the dynamics that make the IMF un-reformable. Its destructive role in Greece provides an object lesson for how southern Europe must shun its horde of ideologues, as Third World countries learned to avoid it by May 2013, the year that Turkey capped the world’s extrication from IMF “advice” … //

… The fact that the IMF’s head has to be a French pro-bank, pro-austerity ideologue, taking orders from Washington officials wield veto power on behalf of Wall Street bankers and bondholders, makes the IMF hopelessly compromised. The icing on the cake is its recent loan to Ukraine, money that Ukrainian President Poroshenko has said will be spent to wage war on Russian-speakers in eastern Ukraine where most of the export industry was located.

By no stretch of the imagination can Ukraine pay this debt. It already has negotiated a 20 percent writedown of its debt to private bondholders, and both Poroshenko and “Yats” insist that they will default on their $3 billion debt to Russia’s sovereign wealth fund falling due this December. That alone will require the IMF to withdraw, because the terms of its Articles of Agreement prevent it from lending to countries that unilaterally default on debts owed to official institutions. (The original idea had in mind the United States, not Russia or China.)

Yet the IMF has not warned that Ukraine must either pay or see itself turned into a financial pariah Greek-style. The Fund has been pulled into the New Cold War in addition to the financial war against labor and against government ability to resist austerity.

Past Reuters reports (and those of the New York Times and other neoliberal press) have popularized the trivializing idea that the reason China, Russia and other BRICS countries have created their own alternative development banks and international currency institutions is merely because they don’t have a large enough vote within the IMF. (Congress has blocked new U.S. contributions to the IMF, preventing a renegotiation of quotas.)

This is not what the BRICS countries say. Their disagreement is that the development philosophy of the IMF and World Bank is to promote austerity to pay bondholders and sell off the public domain to U.S. and other foreign financial investors. No matter how large the foreign quota, the U.S. Government retains veto power to enforce these U.S.-centered rules. The BRICS want a different development philosophy, an alternative to austerity economics and IMF “stabilization plans” whose effect is to destabilize countries submitting to their austerity.

The tragic Greek experience should stand as a warning of the need to withdraw from the rules that have turned the eurozone into an economic dead zone, and the IMF and Troika into brutal debt collectors for European, U.S. and British banks and bondholders. This is not a story that the mainstream press is happy to popularize. And as for the academic economists trotted out as talking heads, they still don’t get it.

(full text, notes).

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