As European governments struggle with the Greek debt crisis, there are fewer people more knowledgeable about the inner workings of the IMF than Ashoka Mody.
Mr Mody was head of the IMF mission to Dublin as Ireland slid into its bailout in 2010. In an interview with the Irish Examiner, the now Princeton professor spoke out strongly against what he sees as “catastrophic” decision-taking by his former employer — the IMF, the European Central Bank and European governments in their dealings with Greece.
He was speaking after the ECB yesterday announced a freeze on the amount of emergency liquidity assistance provided to Greek banks, as ordinary Greeks still queued to withdraw cash from ATMs. Without that lifeblood, the Greek authorities were forced to call a bank holiday and do their best to manage an ongoing run on their banks.
Mr Mody accused the European governments and Greece’s creditors of taking immense risks with the markets.
“We are now collectively, not just the Greeks, in a black hole. Those who think they are insulated from this, may continue to feel that for a few days. But the feeling that this will not spread well beyond Greece is at best wishful thinking, at worst it is denial,” Mr Mody said.
“Europe has got caught in a ‘group think’. Any evidence that contradicts the views of the creditors is disregarded. They are taking a risk that is extraordinary. If they think the Greeks will bear all the burden, history will not be kind to them,” he warned.
He was stinging in his criticism of the Irish Government’s tough stance. “We had a generation of Irish politicians who in their hubris took Ireland down into a deep crisis. Ireland has come out of its crisis. But it seems that the hubris did not go away.
“And it seems we have a new generation of politicians who feel that they have to be grown up, and are now thinking they are protected in some form,” he said.
Greek banks have relied on close to €89 billion in support to stay alive, but the creditors setting the cap yesterday firmly on further assistance ensures that the crisis is entering a new and unpredictable stage.
“Greece is like a patient in an emergency room. At that time you do not ask the patient what kind of life have you lived. Your job is to stitch up the arteries so the patient can live.
“Greece has been going through that process for the past five years. We do not need any more evidence. The plan to get Greece to repay is economically illiterate.”
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