All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF. In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.
ATHENS -- The IMF and Greece's other creditors have assumed that massive fiscal contraction has only a temporary effect on economic activity, employment and taxes, and that slashing wages, pensions and public jobs has a magical effect on growth. This has proved false. Indeed, Greece's post-2010 adjustment led to economic disaster -- and the IMF's worst predictive failure ever.
The status of negotiations between Greece and its official creditors -- the European Commission, the ECB and the IMF -- dominated headlines last week. At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?
Behind the numbers lies an unusually complex set of forces shaping the world economy. Some, such as the decline in the price of oil and the evolution of exchange rates, are highly visible. Some, from crisis legacies to lower potential growth, play more of behind-the-scenes role but are important nevertheless. Let me briefly review them.