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29th Feb 2024

EU commission on the defensive over IMF report

  • Rehn (l) and o'Connor face media questions (Photo: ec.eropa.eu)

The European Commission has hit back at criticism over its handling of the Greek debt crisis, insisting that cutting the country's budget deficit and keeping it in the euro was "no mean feat."

Speaking with reporters on Thursday (6 June), Simon O'Connor, spokesman for Olli Rehn, the bloc's economic and monetary affairs commissioner, described as "plainly wrong" assertions in an International Monetary Fund (IMF) report that not enough had been done to promote economic recovery in Greece

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"We fundamentally disagree that not enough was done to promote growth, this is plainly wrong and unfounded," he said.

In a damning 50-page report published on Wednesday night (6 June), the Washington-based fund pointed to a catalogue of errors made by the Troika - composed of the European Commission, IMF, and the European Central Bank.

While acknowledging that Greece had avoided bankruptcy and remained in the eurozone, the report noted that "the recession has been deep with exceptionally high unemployment."

It also claimed that "the EC, with the focus of its reforms more on compliance with EU norms than on growth impact, was not able to contribute much to identifying growth enhancing structural reforms."

The EU executive has become increasingly sensitive to criticism that it has prioritised austerity ahead of steps to stimulate economic growth and reduce crippling levels of unemployment in the eurozone's crisis-hit countries.

Greece is now in its six consecutive year of recession and has seen economic output fall by over 23 percent since 2008.

At 27 percent, it also has the highest unemployment rate in the EU, while over 62 percent of its under-25s are out of work, also the bloc's highest.

O'Connor instead focused on the "number of successes" highlighted in the IMF report. Keeping Greece in the euro was "no mean feat," he added.

He also attempted to play down the significance of the report, remarking that "an assessment by some IMF staff does not reflect an official view."

Meanwhile, the commission also "fundamentally disagreed" with the IMF's conclusion that a deal should have been struck to restructure Greek debts in 2010.

Attempting this "would have risked systemic contagion," O'Connor said.

The IMF had claimed that "an upfront debt restructuring would have been better for Greece although this was not acceptable to the euro partners."

Despite receiving two bail-out packages in 2010 and 2011 worth over €200 billion, Greece's debt burden has swelled to around 190 percent of GDP, far higher than any other EU country.

O'Connor conceded the Greek crisis had been a "learning process," however.

"Of course, looking back in hindsight, we can look back at decisions that would have been taken in an ideal world…. but all partners did their very best in an unprecedented situation," he insisted

O'Connor also revealed the commission is working on its own review into the Greek crisis, although he did not say when it would be published.

For his part, asked by journalists at a monthly press conference if the ECB would offer its own mea culpa on Greece, the bank's President Mario Draghi replied "not really".

"One good thing about this IMF paper is that the ECB is not being criticised," he joked.

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