The International Monetary Fund’s top economist, Olivier Blanchard, has acknowledged that the fund blew its forecasts for Greece and other European economies because it did not fully understand how government austerity efforts would undermine economic growth.
In October 2012 the IMF admitted austerity measures were causing economic damage which was as much as three times the amount originally forecast. And in this latest paper, they are standing by their initial conclusions, but say the harshest impact of those programmes may be fading as economies start to recover.
Professor Ngaire Woods, former independent advisor to IMF European Regional Advisory Group, told Today business presenter Simon Jack that the IMF have “learnt the lessons of austerity over the last 20 years in other countries.”
She added that the IMF are stressing “any country that can, should slow down austerity, [and] shouldn’t do it as one big bang upfront, because the results on the economy will produce a vicious cycle… Fiscal consolidation should be spread out.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.