by Amelia H. C. Ylagan

WHEN THE International Monetary Fund (IMF) beat its chest in doleful mea culpa in admission of a "miscalculation" on sentencing debt-ridden Greece to austerity and self-rehabilitation, of course the Greeks were livid. "Really? Thanks for letting us know but we can’t forgive you," Apostolos Trikalinos, a 59-year-old garbage collector and a father of two, vented on worldwide television.

For four years into the "fiscal consolidation" (austerity program) imposed on them by the IMF-European Union (EU), the Greeks have seen their incomes plunge by about a third since the debt crisis erupted in 2009. Unemployment has hit nearly 27% and suicide rates have soared by 26%. Worst hit have been the youth, nearly 60% of whom are unemployed, according to analysts quoted by the news agencies. In the four millennia of Greek civilization, never was it seen till now that these ancient and proud people would scavenge garbage, and steal for food.

The IMF mea culpa, released by its Washington office on Wednesday, June 5, 2013, was based on a 50-page internal report entitled "Greece: Ex Post Evaluation of Exceptional Access Under the 2010 Stand-by Arrangement," which reportedly admits that the first bailout of $143 billion (€110 billion) in 2010 was not enough to curb Greece’s downturn. Impliedly, the gap between what was really needed and what was given thwarted the recovery of Greece, and the austerity measures to fill the gap were "too high a price," according to Greek politicians who now gleefully say, "I told you so."

The apologetic more recent paper likely proceeded from a revealing earlier paper, "Growth Forecast Errors and Fiscal Multipliers" by Olivier Blanchard, IMF chief economist, and Daniel Leigh, dated January 2013. The highly technical Blanchard study delves into the econometrics of possible outcomes from fiscal policy, assuming the traditional economic multiplier of 0.5 used for advanced economies. Dizzying formulae abounding in Greek alphas, betas, sigmas and deltas confound the use of a single multiplier for all times and all economies, although the conclusion of the Blanchard paper carefully hedges that "the results do not imply that fiscal consolidation (the avenue chosen by IMF-EU for Greece in crisis) is undesirable."

The Washington Post wryly comments on this pandemic confusion emanating from the IMF itself: "Consider it a mea culpa submerged in a deep pool of calculus and (economic) regression analysis." Perhaps the unexpected but certainly welcome retraction of IMF condemnation did psychiatrically regress the Greek people to its origins as the chosen people of ancient civilization, perchance rousing vestiges of the obsession of mortals then to be like the gods of Olympus. For it is told in the myth of Tantalus that his crime is that after tasting the food for the gods, he attempted to steal some away to give to other mortals. Those who eat of the food for the gods (ambrosia) did not have blood in their veins, but "ichor," the ethereal golden fluid that is the blood of the gods or immortals.

The similitude in mythology could be carried forward in today’s scenario of Greece, tiny "mortal" being elevated to the level of the "gods" (e.g., the big economies of Germany, France and the UK) in the lofty Olympus of the European Union. Perhaps it was too much, too soon, for the Greeks to eat of the food for the gods and be like them, enjoying the privileges of the single currency and single monetary governance of a borderless giant economic community. The EU is recognized by the rest of the world second only to the almighty United States of America in economic and sociopolitical power.

But now the Greeks are incensed and angry at the "unforgivable" affront of a demigod wrongly relegated to slave labor to expiate its sins. This righteous indignation must have been abetted by the mortal frailty of amnesia, for how can both the IMF and the Greeks forget how it all began?

In October 2009, Prime Minister George Papandreou (Master’s degree, London School of Economics) had just come into office, and immediately revealed that Greece’s true total country debt of $410 billion had been hidden from the shocked EU and the alarmed world. He admitted that the recomputed year deficit of 12.7% of GDP was four times more than the euro zone’s limit on member countries. Later investigations established 2009 government deficit at 15.4% of GDP and public debt at 126.8% of GDP making it the biggest deficit amongst the EU member nations. Total public debt was forecast, according to some estimates, to hit 120% of GDP in 2010.

Papandreou had voluntarily initiated austerity measures, reducing spending, increasing taxes, freezing additional taxes, catching and punishing tax evasion, and reducing the public sector. He planned massive privatization of government-held enterprises to raise funds of €50 billion by 2015. But the Greeks were not convinced to suffer in the short term to secure long-term economic stability. Unemployment increased alarmingly and nationwide strikes forced Papandreou to seek direct and immediate bailout from the EU and the IMF. After much resistance from its other economically strong member-nations, the EU and IMF agreed to a rescue package of €110 billion, the first in the troubled euro zone (not only Greece but Spain, Portugal, and Italy were in financial mess). The conditionality was for Greece to cut budget by €30 billion ($39 billion) over three years and to take on other harsh austerity measures to bring its deficit under control. This was to be monitored and evaluated by the financial troika of European Commission, the European Central Bank (ECB) and the IMF.

Violent street riots and protests forced a second tranche EU bailout package of €130 billion ($172 billion) in February 2012, much resisted by France and Germany. By this time, Papandreou had been eased out of power, after he had vainly tried to "consult" the people in a referendum that would have shifted the responsibility for a call for austerity from him to the EU/IMF. It is the troika EU/ECB/IMF that is overseeing austerity measures to cut Greece’s debt to 120.5% of GDP by 2020, in the ineffectiveness of the tenuous coalition government now disbursing the bailout funds.

Why then must the IMF rouse the Furies at this time, by announcing that the austerity route is unreliable as a way to rehabilitating Greece for the medium to long run? Is it the least embarrassing face-saving for obstinate Germany and France, who had been exacting austerity as a pre-condition to bailout money, that the Chief Economist at IMF should spew high-falluting econometrics and absorb the mistake? According to a leaked official report from the European Commission, European Central Bank and the International Monetary Fund, Greece may need another €50 billion ($66 billion) from 2015 to 2020 (footnoted as from the New York Times, March 2012). The new French president, Francois Hollande, successor to the anti-bailout Nicolas Sarkozy, announced in Tokyo at the weekend "the euro zone debt crisis is over but… steps to boost the region’s growth and competitiveness need to be taken."

This is the situation for the EU, region-wide: although the euro zone debt crisis that erupted at the end of 2009 has eased, the region’s collective economy has shrunk for six straight quarters and unemployment has reached 12.2%, the highest since the euro was introduced in 1999 (according to distributed statistics). Indeed, econometrics might have to give way to the reality of preserving the EU and the euro, in this one-for-all, all-for-one community of 17 economically bound nations, big or small.