- International Monetary Fund. Independent Evaluation Office;International Monetary Fund. External Relations Dept.
- Published Date:
- September 2016
Independent Evaluation Office
of the International Monetary Fund
The IMF and the Crises in Greece, Ireland, and Portugal
© 2016 International Monetary Fund
Joint Bank-Fund Library
Names: Takagi, Shinji, 1953– | International Monetary Fund. Independent Evaluation Office
Title: The IMF and the crises in Greece, Ireland, and Portugal / team leader Shinji Takagi.
Other titles: International Monetary Fund and the crises in Greece, Ireland, and Portugal
Description: Washington, DC : International Monetary Fund, 2016. | Includes bibliographical references.
Identifiers: ISBN 9781475525144 (paper)
Subjects: LCSH: Europe—Economic development. | Financial crises—Greece. | Financial crises—Ireland. | Financial crises—Portugal. | International Monetary Fund.
Classification: LCC HC240.I485 2016
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The following Background Papers are available on the IEO website at www.ieo-imf.org.
BP/16-02/01. The IMF and the Crises in Greece, Ireland, and Portugal: An Evaluation by the Independent Evaluation Office—Summary of Views of the Advisory Group
BP/16-02/02. The IMF Executive Board and the Euro Area Crisis—Accountability, Legitimacy, and Governance
BP/16-02/03. IMF Surveillance of the Euro Area: From Conception Through Crisis
BP/16-02/04. The IMF’s Role in Ireland
BP/16-02/05. The Portuguese Crisis and the IMF
BP/16-02/06. The IMF’s Role in the Euro Area Crisis: What Are the Lessons from the IMF’s Participation in the Troika?
BP/16-02/07. The IMF and the Euro Area Crisis: The Fiscal Dimension
BP/16-02/08. Living with Rules: The IMF’s Exceptional Access Framework and the 2010 Stand-By Arrangement with Greece
BP/16-02/09. IMF Engagement with the Euro Area versus Other Currency Unions
BP/16-02/10. The IMF’s Role in the Euro Area Crisis: Financial Sector Aspects
The following conventions are used in this publication:
An en dash (–) between years or months (for example, 2015–16 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2015/16) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY 2016).
Billion means a thousand million; “trillion” means a thousand billion.
“Basis points” refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
As used in this publication, the terms “country” and “economy” do not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
Some of the documents cited and referenced in this report were not available to the public at the time of publication of this report. Under the current policy on public access to the IMF’s archives, some of these documents will become available 3 or 5 years after their issuance. They may be referenced as EBS/YY/NN and SM/YY/NN, where EBS and SM indicate the series and YY indicates the year of issue. Certain other types of documents may become available 20 years after their issuance. For further information, see www.imf.org/external/np/arc/eng/archive.htm.
This report examines the effectiveness of the IMF’s engagement in Greece, Ireland, and Portugal in 2010–14 in order to draw lessons and to enhance transparency. The crises in these countries, coming so soon after the global financial and economic crisis, and occurring in a common currency area comprising highly integrated economies, posed extraordinary challenges to European and world policymakers. The IMF was called upon to provide financing and technical expertise in the management of these crises. The IMF’s role has been a subject of extensive commentary and scrutiny by experts around the world.
The IEO report approaches the topic by asking whether the IMF’s crisis management was appropriate, given the exceptional circumstances; whether it compromised its best economic judgment because of the way it engaged the euro area; and what it could have done differently to achieve better outcomes. The evaluation concludes that the Executive Board generally played a limited role in its supervisory function, and that the IMF’s overall performance in surveillance and crisis lending was uneven. The IMF’s handling of the euro area crisis raised issues of accountability and transparency, which helped create the perception that the IMF treated Europe differently.
Based on the lessons drawn from this experience, the report makes five recommendations for the IMF, in order to improve its governance and operational effectiveness. All of these recommendations received full or qualified support from the Executive Board when it met to discuss the report in July 2016. In supporting these recommendations, the Board reaffirmed the role of independent evaluation as key to good governance and as a means of enhancing the IMF’s external credibility.
I am encouraged by the willingness of the Managing Director and the Executive Board to learn from the past, in order to improve the IMF’s technical capacity and decision-making process. It is hoped that this report, along with systematic efforts to address the issues identified therein, will contribute to strengthening the IMF’s central role in the international monetary system.
Moises J. Schwartz
Director Independent Evaluation Office
The IMF and the Crises in Greece, Ireland, and Portugal
This report was prepared by an IEO team led by Shinji Takagi. The team included Donal Donovan, George Kopits, Ling Hui Tan, Nicolas Véron, Sanjay Dhar, Silvia Sgherri, Miguel de Las Casas, and Carlos de Resende. Martin Eichenbaum, Russell Kincaid, Felipe Larraín, Francesco Luna, Yung Chul Park, Theodore Pelagidis, Sergio Rebelo, Susan Schadler, and Charles Wyplosz contributed substantive inputs, while Roxana Pedraglio, Franz Loyola, Chris Monasterski, Tam Nguyen, and Joshua Wojnilower provided capable research assistance. The team gratefully acknowledges Annette Canizares, Arun Bhatnagar, and Amy Gamulo for providing administrative assistance and Rachel Weaving, Roxana Pedraglio, and Esha Ray for editorial and production management assistance.
The evaluation benefited from comments from an Advisory Group comprising Hamad Al Sayari, Jorge Braga de Macedo, Michel Camdessus, Malcolm Knight, Rachel Lomax, Ngozi Okonjo-Iweala, Jean Pisani-Ferry, Guillermo Ortiz, Yaga Venugopal Reddy, and Edwin Truman, who met on April 7, 2016 to discuss a preliminary version of this report. A summary of the discussion is being issued as a background paper to this evaluation (see Boorman, 2016). In addition, Jacques de Larosière, Clemens Fuest, and Hiroshi Watanabe reviewed the draft report to provide comments. Although this final report has benefited from the comments provided by these individuals, the IEO alone is responsible for the views and assessments stated therein. The report was approved by Moises Schwartz.
Central African Economic and Monetary CommunityCFA
Coopération Financière en Afrique Centrale (CEMAC) or Communauté Financière Africaine (WAEMU)EC
European Court of AuditorsECB
European Central BankECCU
Eastern Caribbean Currency UnionECOFIN
Economic and Financial Affairs Council (EU)EDIS
European Deposit Insurance SchemeEDP
Excessive Deficit Procedure (EU)EFF
Extended Fund Facility (IMF)EFSF
European Financial Stability FacilityEFSM
European Financial Stabilization MechanismELA
Emergency Liquidity Assistance (ECB)EMU
Economic and Monetary Union (EU)EPE
ex post evaluation (IMF)ESM
European Stability MechanismEU
Fiscal Affairs Department (IMF)FSAP
Financial Sector Assessment Program (IMF)G7
Group of Seven (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States)G20
Group of Twenty (G7 plus Argentina, Australia, Brazil, China, India, Indonesia, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, and the European Union)GDP
gross domestic productIEO
Independent Evaluation Office (IMF)IMF
International Monetary FundIMFC
International Monetary and Financial Committee (IMF)LTRO
Long-Term Refinancing Operations (ECB)MCM
Monetary and Capital Markets Department (IMF)OMT
Outright Monetary Transactions (ECB)PSI
private sector involvementRFA
regional financing arrangementSBA
Stand-By Arrangement (IMF)SDR
special drawing right (IMF)SGP
Stability and Growth Pact (EU)SMP
Securities Markets Program (ECB)SRM
Single Resolution Mechanism (EU)SSM
Single Supervisory Mechanism (EU)TA
Trans-European Automated Real-Time Gross Settlement Express Transfer System (ECB)TOR
terms of referenceTSR
Triennial Surveillance Review (IMF)VAT
West African Economic and Monetary Union