[Peace-discuss] Mark Weisbrot: Congress Weighs in on Holding IMF Accountable for Damage Caused by Failed Policies in Greece

[Robert Naiman]

http://www.huffingtonpost.com/mark-weisbrot/congress-imf-greece_b_7716422.html

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Co-director, Center for Economic and Policy Research, Washington, D.C.


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Congress Weighs in on Holding IMF Accountable for Damage Caused by Failed
Policies in Greece
Posted: 07/02/2015 5:35 pm EDT Updated: 12 minutes ago

The battle over the future of Greece will not end on Sunday, no matter how
the vote goes or -- if the Greek people vote "no" -- how the European
authorities respond to their choice. This is a fight over the future of
Europe, and the people who are currently strangling the Greek economy in a
transparent attempt to intimidate the Greek electorate understand this very
well. That is why they are being especially aggressive
<http://www.theglobeandmail.com/report-on-business/rob-commentary/are-european-authorities-trying-to-force-regime-change-in-greece/article25201635/>and
ruthless at this moment: trying to convince Greeks that a "no" vote means
leaving the euro, claiming that such a decision would have calamitous
consequences, and giving them a taste of the financial crisis and economic
disruption that they will suffer through if they refuse to do as they are
told.

Last Sunday, the European Central Bank (ECB) made a deliberate decision to
limit Emergency Liquidity Assistance to the Greek banking system. The limit
was set low enough to force -- for the first time in the six years of
depression that the ECB has deepened and prolonged -- the closure of Greek
banks.

It is not surprising that the very idea of a referendum would provoke the
ire of the eurozone authorities. Unlike the European Union, which has a
different history, the eurozone project has become a fundamentally
anti-democratic
<http://www.theguardian.com/commentisfree/2011/jul/11/eurozone-crisis-euro-monetary-union>
project.
It has to be; the people currently running it want to reverse, as much as
possible, decades of social progress on issues that are vital to Europeans.
But you don't have to take my word for it: there is a paper trail
<http://www.cepr.net/documents/publications/article-IV-2013-01.pdf> of
thousands of pages that spell out their political agenda. The IMF conducts
regular consultations with member governments under Article IV of its
charter, and these result in papers which contain policy recommendations.
There were 67 such consultations for EU countries during the four years of
2008 to 2011, and the pattern was striking: budget tightening was
recommended in all 27 countries, with spending cuts generally favored over
tax increases. Cutting health care and pension spending, reducing
eligibility for disability and unemployment compensation, raising
retirement ages and increasing labor supply were also overwhelmingly common
recommendations.

The European authorities took advantage of the crisis and post-crisis years
to impose parts of this agenda on the weaker eurozone economies: Spain,
Italy, Portugal, Ireland and most brutally of all, Greece. More than 20
governments fell as a result, until finally, in Greece on January 25, a
government was elected that said no. The goal of the European authorities,
therefore, is to topple this government. This has beenapparent
<http://america.aljazeera.com/opinions/2015/6/germany-is-bluffing-on-greece.html>
since
the ECB cut off its
<http://cepr.net/publications/op-eds-columns/greece-ecb-kicks-syriza-in-the-face-syriza-turns-the-other-cheek>
main
line of credit to Greece on February 4.

Now comes a group of U.S. members of Congress warning the IMF that it could
-- perhaps for the first time in decades -- be held accountable for the
economic destruction that it's helping to implement. The letter objects
<https://www.scribd.com/doc/270323472/Congressional-Letter-to-Lagarde-070215-1>
to
the IMF "taking a hard line with respect to demands that Greece implement
further reforms" and notes:

Greece has already reduced its national public sector work force by 19
percent and carried out many of the reforms demanded by the IMF and its
creditors. It has gone through an enormous fiscal adjustment, achieving the
largest cyclically adjusted primary budget surplus in the euro area last
year; and a very large current account adjustment (with a 36 percent
reduction in imports). At the same time, as even the IMF has acknowledged
in its own research, the austerity imposed by Greece's creditors over the
past five years turned out to be far more devastating to the economy than
they had predicted.

Senator Bernie Sanders, who joined House members in signing the letter,
issued his own blistering statement <http://t.co/e8UDU24gwT> yesterday. "At
a time of grotesque wealth inequality, the pensions of the people in Greece
should not be cut even further to pay back some of the largest banks and
wealthiest financiers in the world," said Sanders. Among the House signers
were the co-chairs of the Congressional Progressive Caucus, Representatives
Keith Ellison and Raul Grijalva, and the Dean of the House and Ranking
Member of the Judiciary Committee, Rep. John Conyers.

Unlike many letters from Congress that are ignored by the executive branch,
this one might be taken more seriously by the IMF and the U.S. Treasury
department -- which is the IMF's most powerful overseer. One reason is that
the IMF has been trying for five years to enact reforms in its governance
structure that are very important to the Fund and Treasury -- reforms that
can't be enacted unless they are approved by Congress. These reforms would
make some small changes in voting representation. They wouldn't shift the
balance of power at the Fund, with the U.S. and its allies still likely to
maintain a comfortable majority. But the U.S. government and the Fund have
lost a lot of credibility in recent years by unilaterally holding up even
these largely symbolic changes. They see this hold-up as encouraging
developing countries to opt for creating new institutions such as the
BRICS Development
Bank and Currency Reserve Arrangement
<http://cepr.net/publications/op-eds-columns/brics-new-financial-institutions-could-break-a-long-standing-and-harmful-monopoly>.
More recently, the Obama administration suffered an embarrassing setback
after the U.K., Germany and France ignored their pleas and became founding
members of China's new $100 billion initiative to create an Asian
Infrastructure Investment Bank.

>From the congressional letter:

As members of the U.S. Congress, we must also note the unprecedented
difficulty that the IMF's proposed quota and governance reform has faced in
the U.S. Congress since 2010. As you know, this also has global
implications, as some governments in developing countries have begun to
lose confidence in this effort to make the IMF's voting structure more
representative of its member countries in the twenty-first century and are
seeking institutional alternatives. It will be difficult to get a majority
of the U.S. Congress on board for these important reforms if the IMF is
seen as responsible for further damage to the Greek economy, as well as the
currently unforeseeable consequences of any financial collapse.

The IMF will need all the votes it can get for this legislation to pass
through Congress. It can choose to ignore this warning at its own
institutional risk.

===

Robert Naiman
Policy Director
Just Foreign Policy
www.justforeignpolicy.org
naiman at justforeignpolicy.org
(202) 448-2898 x1
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