Must-Read: Dan Davies: Comment on “The Euro Area Crisis Five Years After the Original Sin”: “The IMF took two decisions on Greece, not one…

…They decided that they could lend without a debt restructuring, and they decided to implement a completely unprecedented front-loaded fiscal consolidation program. The first of these was the subject of the ‘mea culpa’ exercise, but the second has never been revisited… they actually defended it in the lessons-learnt paper…. It seems clear to me that it is the second mistake, not the first, which deserves the name ‘austerity’, and it is blindingly obvious that the overwhelming majority of the economic damage was done by the front-loaded nature of the fiscal cuts. (The IMF occasionally tries to claim that the headline number of the debt/GDP ratio had a negative effect on business confidence, but this seems pretty desperate to me when you’re trying to explain what happened to Greek GDP and the alternative explanation is simply the cut in government spending).
But having noted that the decision to slash and burn the primary deficit might have been a bad idea, Orphanides then spends the rest of the paper talking about the minor mistake which made hardly any difference!…