«Missão da Troika na Assembleia da República, Lisboa, 18/09/2013» foto de Natacha Cardoso / Global Imagens https://globalimagens.pt/pages/relacionadas.xhtml?popup=14719752&imagem=14719735
Incredible that the party of Prime Minister of Portugal, PSD, criticize IMF (not German Government, not ECB or EC) after a long way of supporting that institution since power assalt.
IMF errors that turns more Poor tugal and other countries are visible again in IMF limited reflections (with them blindness they see what can see):
IMF errors that turns more Poor tugal and other countries are visible again in IMF limited reflections (with them blindness they see what can see):
IMF POLICY PAPER September 17, 2013
«REASSESSING THE ROLE AND MODALITIES OF FISCAL POLICY IN ADVANCED ECONOMIES»
http://www.imf.org/external/np/pp/eng/2013/072113.pdf
«(...) 47. The fundamental challenge facing policymakers today is to reduce deficits and debt levels in a way that ensures stability but is sufficiently supportive of short-term economic growth, employment, and equity. As many AEs grapple with high public debt and unsustainable fiscal deficits, the design of fiscal adjustment—in terms of both speed and content—has returned to the forefront of the policy debate. Recent international experience has stimulated an active debate regarding the optimal pace of fiscal consolidation and how that pace depends on the state of the economy, the conditions of public finances, and the extent of market pressures.
49. Frontloaded fiscal consolidation was often thought to be the most effective approach to restoring the health of public finances. Based on a cross-country panel analysis, Alesina and Ardagna (1998) argues that frontloaded fiscal adjustment: (i) maximizes debt reduction, since the earlier a country achieves a high primary surplus, the higher would be the cumulative primary surpluses and therefore the more debt reduction over any given horizon; (ii) minimizes corporate and household uncertainties about (future) fiscal consolidation needs, which would otherwise weigh on private demand; (iii) boosts market confidence (especially in countries experiencing sovereign stress) and lowers government yields, with knock-on benefits for both fiscal indicators and private investment; and (iv) is associated with higher long-term growth and more durable debt reduction.
50. However, the desirability of frontloaded fiscal consolidations was less established in policy circles. Some IMF studies of large fiscal adjustments (Horton and others, 2006, for example) found that both frontloaded and phased consolidations could be durable. Moreover, for a sample of emerging economies, Baldacci and others (2006) found that “large and back-loaded fiscal adjustments have the highest likelihood of success.” A more recent study of 66 fiscal consolidation plans in the EU over 1991–2007 by Abbas and others (2011) also suggests that policymakers were not convinced about the benefits of frontloading consolidation, since less than one-fourth of the plans studied envisaged frontloaded consolidation.
51. The crisis has reignited the debate on the merits of frontloaded fiscal adjustment. As discussed above, there are reasons to believe that fiscal multipliers are higher during crises than in normal times, and that hysteresis effects could be more pronounced in deep recessions.30 As a result, a view has emerged that excessive frontloading can hurt growth to the point that it undermines social and political cohesion, and weakens rather than strengthens market confidence (Cottarelli and Jaramillo, 2012). In such an environment, frontloaded efforts may even be “selfdefeating,” and fail to achieve the consolidation targets in the short run due to negative growth and negative confidence effects. For this to happen, the initial level of the debt-to-GDP ratio must already be high and the negative growth impact on the denominator of the debt-to-GDP ratio must be large enough to increase the debt ratio in the short run (Eyraud and Weber, 2013). IMF (2012e) analyzes the case of the UK to show that the combination of multipliers that are asymmetrically
30 Hysteresis is expected to be more pronounced during deep recessions: the unemployment rate, the duration of unemployment spells (which increases non-linearly with the unemployment rate), and the probability of dropping out of the labor market are all higher.
large in recessions and substantial hysteresis effects can render frontloaded consolidations welfarereducing.
52. While too much frontloading may be “self-defeating,” excessive delay may also be very costly. In particular, if markets lose confidence in the government’s willingness eventually to put fiscal policy on a sustainable footing and start to demand higher interest rates, then debt dynamics can quickly become unsustainable. Given the uncertainty about the point at which a country will lose market access, and the possibility of multiple equilibria, judgments about whether consolidation programs are excessively frontloaded will be uncertain in practice: country authorities will never be in a position to know for sure whether a slightly more gradual adjustment path than that opted for would have been accepted by markets or would have led to a collapse of confidence.
On the other hand, Blanchard, Mauro, and Dell’Ariccia (2013) have argued that given the limited empirical evidence in support of confidence effects, frontloading as a means to increase confidence does not seem desirable, except for countries facing market pressures.
53. The cost of excessive frontloading or excessive postponement can be particularly large, even nonlinear, during deep recessions.31 As discussed above, fiscal multipliers are especially large when monetary policy is constrained by the ZLB and credit is tight; and the cost of an output loss is larger and hysteresis effects are more pronounced than usual when the economy is in a slump. But the costs of indefinite postponement of needed adjustment are also particularly large during deep recessions because the risk of a confidence crisis and associated output losses may increase non-linearly with the size of fiscal imbalances. Even if a crisis can be avoided, a modest increase in interest rates can still have severe effects when government debt is high. The risk of a confidence crisis or higher interest rates may be high enough that there is social and political
consensus to move ahead with fiscal adjustment.
54. As mere promises to undertake fiscal adjustment later may not be persuasive, gradual consolidation needs to be anchored in a credible medium-term plan. In countries with some fiscal space in the short run, policymakers concerned about the growth impact of fiscal adjustment could approve deficit reduction measures now, but phase in the actual spending cuts and tax increases. For example, reforms to public pension plans can be legislated now, but with much of the savings only starting to accumulate starting several years out, as seen with the reforms to Social Security in the United States in the 1980s (Romer, 2012). However, in the absence of a “perfect commitment technology” that can ensure that fiscal adjustment promised for later will be implemented, a gradual fiscal adjustment should, in general, involve a “modicum” of fiscal adjustment at an early stage and be anchored in a credible medium-term plan (Blanchard and
Cottarelli, 2010; Cottarelli and Viñals, 2009; Abbas and others, 2010; IMF Fiscal Monitor, various
issues). To reduce the risk of a negative market reaction, medium-term adjustment plans should be
supported by reforms to strengthen fiscal institutions, as discussed below, and broader structural
31 For a more in-depth discussion of possible nonlinearities arising from following “extreme” approaches, see
Cottarelli (2013).
Cottarelli (2013).
reforms to boost growth (Everaert and Allard, 2010; IMF, 2012a).32 Given a credible plan supported by strong fiscal institutions, if growth does underperform (relative to expectations), the government should allow automatic stabilizers to operate. This means letting headline balances deteriorate, as
long as the structural fiscal adjustment plan is on track and the market does not react badly (IMF, 2012d).33
55. Countries under market pressures, however, may still have little choice but to frontload adjustment. They will face higher interest rates, which will translate into a higher debt service and crowd out socially beneficial spending (Debrun and Kinda, 2013). Moreover, these countries risk losing market access if adjustment efforts are not viewed as credible or sufficient (e.g., to stabilize the debt ratio and put it on a declining path over time). As we have seen for some euro area members, countries in a weak fiscal position that are facing market pressure or have lost market access have undertaken large and frontloaded adjustments (Figures 14 and 15; see also the IMF Fiscal Monitor, various issues). In many countries, fiscal imbalances are of such magnitude that addressing them in the near term would require adjustment on a scale that would dramatically
impact economic activity and would have devastating consequences for the provision of
government services. Depending on the elasticity of the response of output to deficit reduction, and
of interest rates to growth, it is conceivable that a very large adjustment could lead—at least in the
short run—to an increase, rather than a decline, in debt ratios and borrowing costs. Accordingly,
even for countries under market pressure there are “speed limits” that govern the desirable pace of
adjustment (Cottarelli, 2013).
56. The crisis has reaffirmed the precrisis views on cross-country fiscal policy coordination
and fiscal spillovers. In the early phase of the crisis, a fairly broad consensus emerged that the
unprecedented shocks hitting AEs required international coordination of fiscal stimulus measures.34
As the conventional view predicts, and the previous section illustrates, the channels along which
fiscal spillovers operate can work during consolidations too, with effects of consolidation amplified
when synchronized across countries, especially when monetary policy accommodation is
constrained by the ZLB. This would argue in favor of coordinating policies across AEs to reduce the
synchronization of fiscal adjustment efforts, but since 2010, this has not been achieved.
32 In this context, consideration could be given to making a more gradual adjustment contingent on a commitment to specific growth-enhancing structural reforms.
33 Consistent with this, the IMF and some euro area member states have successfully argued for a relaxation of headline fiscal deficit targets, even in crisis countries such as Ireland and Spain, as long as progress is being made on structural fiscal adjustment plans. The Fund has also advised countries with relatively more fiscal space and the confidence of markets (e.g., Germany, the Netherlands, the United Kingdom, and the United States) to slow the pace of consolidation if growth slows down (IMF, 2012d).
34 See the section on fiscal policy as a countercyclical tool and references therein.
57. The lack of broad support for coordinating adjustment efforts illustrates the challenges of policy coordination when national interests do not coincide. One argument for more gradual or back-loaded adjustment in countries with fiscal space is that, by reducing spillovers, it allows for slower (less frontloaded) adjustment in countries without fiscal space. However, countries may be reluctant to smooth frontloaded adjustments for the purpose of reducing negative spillovers if this puts market confidence at risk and reduces their own fiscal space. Although a coordinated adjustment could ultimately benefit all countries, a cooperative agreement may be hard to reach and, because countries have no ex-post incentive to comply, even harder to sustain (IMF, 2007a). (...)»
«Approved By Olivier Blanchard and Carlo Cottarelli»
«In THE SHOCK DOCTRINE, Naomi Klein explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America’s “free market” policies have come to dominate the world-- through the exploitation of disaster-shocked people and countries.
At the most chaotic juncture in Iraq’s civil war, a new law is unveiled that would allow Shell and BP to claim the country’s vast oil reserves…. Immediately following September 11, the Bush Administration quietly out-sources the running of the “War on Terror” to Halliburton and Blackwater…. After a tsunami wipes out the coasts of Southeast Asia, the pristine beaches are auctioned off to tourist resorts.... New Orleans’s residents, scattered from Hurricane Katrina, discover that their public housing, hospitals and schools will never be reopened…. These events are examples of “the shock doctrine”: using the public’s disorientation following massive collective shocks – wars, terrorist attacks, or natural disasters -- to achieve control by imposing economic shock therapy. Sometimes, when the first two shocks don’t succeed in wiping out resistance, a third shock is employed: the electrode in the prison cell or the Taser gun on the streets.
Based on breakthrough historical research and four years of on-the-ground reporting in disaster zones, The Shock Doctrine vividly shows how disaster capitalism – the rapid-fire corporate reengineering of societies still reeling from shock – did not begin with September 11, 2001. The book traces its origins back fifty years, to the University of Chicago under Milton Friedman, which produced many of the leading neo-conservative and neo-liberal thinkers whose influence is still profound in Washington today. New, surprising connections are drawn between economic policy, “shock and awe” warfare and covert CIA-funded experiments in electroshock and sensory deprivation in the 1950s, research that helped write the torture manuals used today in Guantanamo Bay.
The Shock Doctrine follows the application of these ideas through our contemporary history, showing in riveting detail how well-known events of the recent past have been deliberate, active theatres for the shock doctrine, among them: Pinochet’s coup in Chile in 1973, the Falklands War in 1982, the Tiananmen Square Massacre in 1989, the collapse of the Soviet Union in 1991, the Asian Financial crisis in 1997 and Hurricane Mitch in 1998.»
long as the structural fiscal adjustment plan is on track and the market does not react badly (IMF, 2012d).33
55. Countries under market pressures, however, may still have little choice but to frontload adjustment. They will face higher interest rates, which will translate into a higher debt service and crowd out socially beneficial spending (Debrun and Kinda, 2013). Moreover, these countries risk losing market access if adjustment efforts are not viewed as credible or sufficient (e.g., to stabilize the debt ratio and put it on a declining path over time). As we have seen for some euro area members, countries in a weak fiscal position that are facing market pressure or have lost market access have undertaken large and frontloaded adjustments (Figures 14 and 15; see also the IMF Fiscal Monitor, various issues). In many countries, fiscal imbalances are of such magnitude that addressing them in the near term would require adjustment on a scale that would dramatically
impact economic activity and would have devastating consequences for the provision of
government services. Depending on the elasticity of the response of output to deficit reduction, and
of interest rates to growth, it is conceivable that a very large adjustment could lead—at least in the
short run—to an increase, rather than a decline, in debt ratios and borrowing costs. Accordingly,
even for countries under market pressure there are “speed limits” that govern the desirable pace of
adjustment (Cottarelli, 2013).
56. The crisis has reaffirmed the precrisis views on cross-country fiscal policy coordination
and fiscal spillovers. In the early phase of the crisis, a fairly broad consensus emerged that the
unprecedented shocks hitting AEs required international coordination of fiscal stimulus measures.34
As the conventional view predicts, and the previous section illustrates, the channels along which
fiscal spillovers operate can work during consolidations too, with effects of consolidation amplified
when synchronized across countries, especially when monetary policy accommodation is
constrained by the ZLB. This would argue in favor of coordinating policies across AEs to reduce the
synchronization of fiscal adjustment efforts, but since 2010, this has not been achieved.
32 In this context, consideration could be given to making a more gradual adjustment contingent on a commitment to specific growth-enhancing structural reforms.
33 Consistent with this, the IMF and some euro area member states have successfully argued for a relaxation of headline fiscal deficit targets, even in crisis countries such as Ireland and Spain, as long as progress is being made on structural fiscal adjustment plans. The Fund has also advised countries with relatively more fiscal space and the confidence of markets (e.g., Germany, the Netherlands, the United Kingdom, and the United States) to slow the pace of consolidation if growth slows down (IMF, 2012d).
34 See the section on fiscal policy as a countercyclical tool and references therein.
57. The lack of broad support for coordinating adjustment efforts illustrates the challenges of policy coordination when national interests do not coincide. One argument for more gradual or back-loaded adjustment in countries with fiscal space is that, by reducing spillovers, it allows for slower (less frontloaded) adjustment in countries without fiscal space. However, countries may be reluctant to smooth frontloaded adjustments for the purpose of reducing negative spillovers if this puts market confidence at risk and reduces their own fiscal space. Although a coordinated adjustment could ultimately benefit all countries, a cooperative agreement may be hard to reach and, because countries have no ex-post incentive to comply, even harder to sustain (IMF, 2007a). (...)»
«Approved By Olivier Blanchard and Carlo Cottarelli»
In another point of view we can see the work of Naomi Klein (http://www.naomiklein.org/shock-doctrine) that give salience to the opportunity for neo liberal forces gaven by 2008-... crisis with euro area crisis included, with Greece, Ireland, Portugal, Spain and Italy as a zone to invasion for that negative forces with the badly sides of the liberals and not with them good sides:
«In THE SHOCK DOCTRINE, Naomi Klein explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America’s “free market” policies have come to dominate the world-- through the exploitation of disaster-shocked people and countries. At the most chaotic juncture in Iraq’s civil war, a new law is unveiled that would allow Shell and BP to claim the country’s vast oil reserves…. Immediately following September 11, the Bush Administration quietly out-sources the running of the “War on Terror” to Halliburton and Blackwater…. After a tsunami wipes out the coasts of Southeast Asia, the pristine beaches are auctioned off to tourist resorts.... New Orleans’s residents, scattered from Hurricane Katrina, discover that their public housing, hospitals and schools will never be reopened…. These events are examples of “the shock doctrine”: using the public’s disorientation following massive collective shocks – wars, terrorist attacks, or natural disasters -- to achieve control by imposing economic shock therapy. Sometimes, when the first two shocks don’t succeed in wiping out resistance, a third shock is employed: the electrode in the prison cell or the Taser gun on the streets.
Based on breakthrough historical research and four years of on-the-ground reporting in disaster zones, The Shock Doctrine vividly shows how disaster capitalism – the rapid-fire corporate reengineering of societies still reeling from shock – did not begin with September 11, 2001. The book traces its origins back fifty years, to the University of Chicago under Milton Friedman, which produced many of the leading neo-conservative and neo-liberal thinkers whose influence is still profound in Washington today. New, surprising connections are drawn between economic policy, “shock and awe” warfare and covert CIA-funded experiments in electroshock and sensory deprivation in the 1950s, research that helped write the torture manuals used today in Guantanamo Bay.
The Shock Doctrine follows the application of these ideas through our contemporary history, showing in riveting detail how well-known events of the recent past have been deliberate, active theatres for the shock doctrine, among them: Pinochet’s coup in Chile in 1973, the Falklands War in 1982, the Tiananmen Square Massacre in 1989, the collapse of the Soviet Union in 1991, the Asian Financial crisis in 1997 and Hurricane Mitch in 1998.»
From German Government we can´t hear any assumption of errors ... and we are so near German Federal elections.
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