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Lagarde claims measures ensured weakest don't 'suffer too much'

Accepting mistakes were made, IMF chief says Greece is returning to growth

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'We have made sure there was enough of a safety net so that people who were most exposed would not suffer too much,' IMF managing director Christine Lagarde tells Australian public broadcaster ABC

People reach out to take fruits and vegetables distributed for free by farmers in Athens, 6 February 2013 (Photo: Reuters) People reach out to take fruits and vegetables distributed for free by farmers in Athens, 6 February 2013 (Photo: Reuters) The head of the International Monetary Fund has said that the troika made sure that “enough of a safety net” existed in Greece “so that people who were most exposed” to austerity “would not suffer too much”, in comments that came a day before an article in one of the world’s leading medical journals said the Greek government and the troika are “in denial” about the scale of the hardship inflicted on the people of Greece by unprecedented cuts in health spending.

Acknowledging the “difficult process” which Greece has undergone, IMF managing director Christine Lagarde told Australian public broadcaster ABC that she was now satisfied that the country was now on its way to growth.

“We can only celebrate now the fact Greece is finally coming out with a primary surplus, as we call it, which hasn't happened since 1943, from my recollection”, she told Australian state television ABC.

In 1943, Greece was under Nazi occupation and economy in the hands of a collaborationist government. On Wednesday, the central Bank of Greece reported that the state had achieved a current account surplus in 2013, for the first time since official data began in 1948

Lagarde admitted there were miscalculations and a wrong approach as regards Greece, but this was partly due to the fact that "numbers were largely in excess of what had been represented".

“When you have a situation like that, you need to deal with it. And the way to deal with it was certainly to restore a bit of sanity in the public finance and to make sure that the numbers were disclosed properly, that everything was documented.”

The IMF chief spoke of a "long journey" with huge sacrifices on the part of the Greeks, but the harsh measures were necessary, she said, so as to help the Greek economy recover.

She said the “path” taken has been “hard on the Greek populations”, claiming that everything possible was done to “ make sure that the burden would be fairly borne by all and not just by the employees and the civil servants”.

“We have made sure there was enough of a safety net so that people who were most exposed would not suffer too much,” said Lagarde, who assumed her position the IMF in 2011 on a tax-free salary of $467,940 per year plus a $83,760 expenses allowance.

But according to an article published in The Lancet on Friday, health-sector cuts have left 800,000 potential beneficiaries are left without unemployment benefits and health coverage". It said scientific evidence does not support government claims that deep public-spending cuts have not damaged health and that vulnerable groups, such as the homeless or uninsured people, have not been denied access to healthcare.

Christine Lagarde (Photo: Reuters) Christine Lagarde (Photo: Reuters) “In view of this detailed body of evidence for the harmful effects of austerity on health, the failure of public recognition of the issue by successive Greek governments and international agencies is remarkable,” the report states.

“Indeed, the predominant response has been denial that any serious difficulties exist … This dismissal meets the criteria for denialism, which refuses to acknowledge, and indeed attempts to discredit, scientific research.”


The transcript:

Rana Baleh: The fiscal austerity measures implemented in Greece to alleviate the effects of the global financial crisis ultimately had a damaging effect on both the Greece and European economy. How will the IMF modify its policies to ensure such economic miscalculations won't happen again?

Christine Lagarde: Thank you, Rana. I have looked at Greece from different angles because when the Greek issues started and we had to put a programme together, I was finance minister for France and then I morphed into being managing director of the International Monetary Fund and the Greek programme continued throughout.

So the real initial miscalculations were the ones that led to the wrong numbers, certainly the wrong approach to the financial situation through which Greece was going, and the fact that the country was running debt and running deficit largely ... in numbers that were largely in excess of what had been represented, let's put it that way. When you have a situation like that, you need to deal with it. And the way to deal with it was certainly to restore a bit of sanity in the public finance and to make sure that the numbers were disclosed properly, that everything was documented, to make sure that, at some stage, the Greek economy could return to financing itself and to standing on its own merits and its own strength, rather than be on life support, so that was the whole purpose of the various programmes that were put in place between the European partners of Greece and the IMF with Greece.

Now, it has been a long journey, we can only celebrate now the fact Greece is finally coming out with a primary surplus, as we call it, which hasn't happened since 1943, from my recollection. So as much as there has been miscalculation, misquotation of numbers, clearly a path has been taken, which has been hard on the Greek populations, and where we have done everything we could to make sure that the burden would be fairly borne by all and not just by the employees and the civil servants, we have made sure there was enough of a safety net so that people who were most exposed would not suffer too much. But still, it has been a very difficult process through which the country went and through which the Greek people, you know, made huge sacrifices.

Note: The original version of this article said that Lagarde's comment about a 1943 primary surplus was "clearly" a reference to the Bank of Greece reporting earlier in the week that Greece had achieved its first current account surplus since 1948. There is no evidence that Lagarde was referring to the central bank's data. Furthermore, the central bank said that the current account balance was the first recorded since records began in 1948, not the first since 1948. This article was corrected on 24 February 2014 to reflect the above. 

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