Members of Congress Question Austerity Policies in Jamaica, Greece that Have Resulted in Unsustainable Debt Burdens, Stagnation and Recession, and High Unemployment
July 16, 2015
Contact: Dan Beeton, 202-239-1460
Washington, DC – New letters from members of the U.S. Congress questioning International Monetary Fund (IMF) policies imposing austerity in countries such as Jamaica and Greece are a sign of growing concern and dissatisfaction with “failed” measures that result in unsustainable debt burdens and high unemployment as they hinder economic growth, Center for Economic and Policy Research (CEPR) Co-Director Mark Weisbrot said today. Weisbrot referred to a new letter [PDF] signed by several members of the House of Representatives that was sent to President Obama Tuesday questioning the IMF’s program for debt-addled Jamaica, and a congressional letter to IMF Managing Director Christine Lagarde on July 2 criticizing the austerity policies imposed on Greece that have resulted in an unsustainable debt burden and prolonged depression.
“It has become increasingly clear to members of Congress, to economists, and to the larger public that austerity programs in Jamaica, Greece and other countries - while having the stated purpose of to bringing down debt – have resulted in greater and unsustainable debt burdens for these countries and prolonged economic downturns, with no light at the end of the tunnel,” Weisbrot said.
The congressional letter [PDF] on Jamaica notes:
Jamaica now has the world’s most austere national budget – with a 7.5% primary surplus last year and for at least the next three years as part of the current IMF program. Its interest burden is among the world’s highest (8% of GDP) and interest payments to multilateral financial institutions surpassed multilateral loan disbursements in 2012 and 2013. Last year, Jamaica paid $136 million more to the IMF than it received from it.
Members who signed the letter, Reps. Maxine Waters (D – Calif., Ranking Member on the Financial Services Committee), Yvette Clarke (D – N.Y.), Jackson Lee (D – Texas), Meeks (D – N.Y., also a Financial Services Committee member) and Rangel (D – N.Y.), urge the Obama administration to “revisit the terms of Jamaica's IMF program.” In particular, the members state: “We believe that the IMF should lower Jamaica’s budgetary surplus threshold, among other measures, and that the IMF and the multilateral development banks should urgently consider extending the maturities of the government’s current loans.”
The letter follows a July 2 letter from members of the House and Senator Bernie Sanders (D – Vt.) to IMF Managing Director Christine Lagarde that objected to the IMF “taking a hard line with respect to demands that Greece implement further reforms” and noted:
Greece has already reduced its national public sector work force by 19 percent and carried out many of the reforms demanded by the IMF and its creditors. It has gone through an enormous fiscal adjustment, achieving the largest cyclically adjusted primary budget surplus in the euro area last year; and a very large current account adjustment (with a 36 percent reduction in imports). At the same time, as even the IMF has acknowledged in its own research, the austerity imposed by Greece's creditors over the past five years turned out to be far more devastating to the economy than they had predicted.
The letter warned that legislation on IMF governance reform, desired by the IMF, could be held up in the U.S. Congress “if the IMF is seen as responsible for further damage to the Greek economy, as well as the currently unforeseeable consequences of any financial collapse.”
“These letters represent significant pushback against the IMF’s role in the debt crises in Jamaica and Greece,” Weisbrot said. “The U.S. has veto power in the IMF, and the Fund may find it will have to take these congressional concerns seriously.”