* IMF had too-optimistic forecasts for Greek economy
* Fund should have pushed harder on Greek debt restructuring
* Greece may still need more debt relief
By Anna Yukhananov
WASHINGTON, June 5 The International Monetary
Fund on Wednesday said that it lowered its normal standards for
debt sustainability to bail out Greece and its projections for
the Greek economy may have been overly optimistic.
The IMF was one of a trio of international lenders that in
2010 stepped in to keep the euro zone country from defaulting on
its debt and departing the common currency bloc. The IMF pledged
about 30 billion euros ($39 billion) to Greece at the time, out
of a total package of 110 billion euros.
Some IMF board members and others criticized the fund for
giving Greece so much money in comparison to the size of its
economy, accusing the lender of being overly swayed by its
At the time, the IMF insisted Greece's debt levels were
sustainable as long as its projections for the economy were
In a report that looked back at the bailout, the Fund for
the first time said it lowered its bar for Greece, which could
reignite concerns about the lender's impartiality.
The IMF said its support for Greece in 2010 was necessary to
prevent the nation's problems from spilling over into the rest
of the euro zone and the global economy.
"There was, however, a tension between the need to support
Greece and the concern that debt was not sustainable with high
probability," according to the IMF's evaluation.
"In response, the exceptional access criterion was amended
to lower the bar for debt sustainability in systemic cases."
After the Greek program was approved, the IMF and the other
bailout lenders - the European Commission and the European
Central Bank - required Greece to immediately cut some of its
debt and implement structural reforms.
There were "notable failures" in the results, the IMF said.
Greece remained in the euro zone and cut some of its debt, but
failed to restore market confidence. The economy plunged into
one of the worst recessions to ever hit a country in peacetime,
with output falling 22 percent from 2008 to 2012.
Greece's economy is likely to shrink for the sixth
consecutive year in 2013.
The evaluation said the IMF's assumptions for the Greek
economy can "be criticized for being too optimistic."
The report also said the IMF should have pushed more
forcefully for private lenders to take a "haircut" on Greece's
debt earlier in 2011, once it was clear Greece's debt was not
"Earlier debt restructuring could have eased the burden of
adjustment on Greece and contributed to a less dramatic
contraction in output," according to the report.
The Fund last year said government spending cuts in general
may hurt growth more than it had previously thought, and that
countries should postpone deep spending cuts while their
economies remain wobbly.
According to the evaluation, the Washington-based lender may
have been overly constrained by working with its European
partners within a monetary union, and not focused enough on
ensuring political support existed within Greece for the rapid
economic adjustments called for under the bailout.
The report also said there was a problem getting adequate
data from Athens on its economy, and the IMF should be more
skeptical of official data going forward.
In 2012, the IMF and the other lenders approved a new,
longer program for Greece to help it bring its economy back into
gear, once it was clear the previous bailout was not working.
Greece's problems with providing official data may not be a
thing of the past, as the Fund said Greece provided inaccurate
information to the IMF in January.
Greece, which has had persistent problems in collecting
taxes, promised to move 50 auditors to the tax unit responsible
for those with high incomes to comply with the IMF's conditions.
Greece told the IMF it had done so in order to receive its
next chunk of aid, but in fact only 33 auditors were moved.
The IMF's board decided to give Greece a waiver for the
action. Greece has since corrected the problem, the board said
Greece's current program also still has issues with debt
sustainability, the IMF has said. The country may still need
some debt relief from its European partners to ensure it can
meet the IMF's targets for debt-to-GDP levels, the Fund said in
a separate report on Wednesday.
Greece will have a 4 billion euro financing gap starting
from the second half of 2014, the IMF said. It will need to find
savings by collecting more taxes and through other measures,
equal to a total of 3.5 percent of GDP.
"It is positive that the report (about the 2010 program)
recognizes that there were mistakes in Greece's program in the
past and we hope that they will not be repeated in the future
and then create the need for corrective action," a senior Greek
government official said, speaking on condition of anonymity.