Leaked minutes of IMF meetings in 2010 show that Argentina, Brazil, India, Russia and Switzerland all argued that some Greek debt owed to private banks should be cancelled before any bailout from the institution.
In documents released by the Wall Street Journal, these countries and others argued that IMF loans would actually bail out private European banks, leaving Greece in debt and an even worse economic situation. This is exactly what has happened; Greece’s economy is now in its sixth year of recession, the government’s foreign debt has increased to 180 per cent of GDP and one-in-ten of the population now live in extreme poverty.
As recently as June 2013, IMF Managing Director Christine Lagarde claimed:
“In May 2010, we knew that Greece needed a bailout, but not that it would require debt restructuring … We had no clue that the overall economic situation was going to deteriorate as quickly as it did.”
The leaked documents show this is not true; many member countries were warning that debt cancellation was necessary and without it Greece’s economy would crash. Most strikingly, drawing on their own experience of failed bailouts in the late 1990s and early 2000s, Argentina argued in an IMF Board meeting in May 2010 that a “debt restructuring should have been on the table”. Brazil said the IMF loans:
“may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions”.
Iran said it would have expected a debt restructure to be discussed, as did Egypt, which said the IMF’s growth projections were “optimistic”, a word repeated by China. The growth projections were extremely optimistic; Greece’s economy is now 15% smaller than the IMF said it would be.
India warned that the scale of cuts would start a spiral of falling unemployment which would reduce government revenue, causing the debt to increase, and making a future debt restructuring inevitable. They did; unemployment in Greece is over 25%, with almost two-in-three young people out of work.
Switzerland was the one richer country which spoke out against the IMF and EU plans, saying:
“Why has debt restructuring and the involvement of the private sector in the rescue package not been considered so far?”
It seems incredible that despite such arguments made by its Board members, the IMF went ahead with bailouts which allowed German, French and British banks to escape from their reckless lending, whilst huge suffering has been imposed on the Greek people. One of the reasons is that the IMF is still controlled by the EU and US, who acted entirely in the interests of their banks.
Another is that the IMF’s raison d’etre is to bail out wealthy financial institutions; it is what they’ve been doing since the Third World Debt crisis first erupted in 1982. And what they continue to do in Jamaica, Pakistan and Tunisia to this day.
Greece finally did negotiate to reduce by half its debt to private creditors in 2012. But by that stage, 65% of the debt was owed to the public through the EU and IMF bailout loans, with many wealthy speculators getting their money out over the previous two years. This too little too late reduction has still resulted in Greece’s debt increasing, as more bailout loans were needed for Greek banks, which were passed on to the government.
The interest the IMF charges on its loans to the likes of Greece, Pakistan, Jamaica, Ireland and Portugal mean it has made $3.1 billion in profit in the last year out of the suffering imposed on others.
These failed bailout debts need to be cancelled. Through new taxes, money needs to be reclaimed from the true beneficiaries of bank bailouts. And a new system is needed to cancel debts when crises arise, rather than looking to bailouts from a Fund of the wealthy, run by the wealthy, for the wealthy.