Front Matter

Front Matter

Author(s):
International Monetary Fund. Independent Evaluation Office;International Monetary Fund. External Relations Dept.
Published Date:
September 2016
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    EVALUATION REPORT

    IEO

    Independent Evaluation Office

    of the International Monetary Fund

    The IMF and the Crises in Greece, Ireland, and Portugal

    © 2016 International Monetary Fund

    Cataloging-in-Publication Data

    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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    Contents

    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.

    Foreword

    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.

    Abbreviations

    CEMAC

    Central African Economic and Monetary Community

    CFA

    Coopération Financière en Afrique Centrale (CEMAC) or Communauté Financière Africaine (WAEMU)

    EC

    European Commission

    ECA

    European Court of Auditors

    ECB

    European Central Bank

    ECCU

    Eastern Caribbean Currency Union

    ECOFIN

    Economic and Financial Affairs Council (EU)

    EDIS

    European Deposit Insurance Scheme

    EDP

    Excessive Deficit Procedure (EU)

    EFF

    Extended Fund Facility (IMF)

    EFSF

    European Financial Stability Facility

    EFSM

    European Financial Stabilization Mechanism

    ELA

    Emergency Liquidity Assistance (ECB)

    EMU

    Economic and Monetary Union (EU)

    EPE

    ex post evaluation (IMF)

    ESM

    European Stability Mechanism

    EU

    European Union

    FAD

    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 product

    IEO

    Independent Evaluation Office (IMF)

    IMF

    International Monetary Fund

    IMFC

    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 involvement

    RFA

    regional financing arrangement

    SBA

    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

    technical assistance

    TARGET

    Trans-European Automated Real-Time Gross Settlement Express Transfer System (ECB)

    TOR

    terms of reference

    TSR

    Triennial Surveillance Review (IMF)

    VAT

    value-added tax

    WAEMU

    West African Economic and Monetary Union

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