[Marxism] U.S. Congress Weighs in on Holding IMF Accountable for Damage Caused by Failed Policies in Greece

Dayne Goodwin daynegoodwin at gmail.com
Fri Jul 3 03:47:53 MDT 2015


Congress Weighs in on Holding IMF Accountable for Damage Caused by
Failed Policies in Greece
by Mark Weisbrot, Co-director, Center for Economic and Policy
Research, Washington, D.C.
The World Post, July 2
<http://www.huffingtonpost.com/mark-weisbrot/congress-imf-greece_b_7716422.html>

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 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 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 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 been apparent since the ECB cut off its 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 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 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. 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.



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