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A day after European Union finance ministers met in Brussels, Rehn took the unusual step of sending a letter* to all the ECOFIN officials regarding, among other things, the so-called fiscal multipliers for Greece’s programme.
Rehn’s comments suggest he believes that any hope the Greek government has of changing the programme should be nipped in the bud. “Recent studies on fiscal multipliers are of particularly limited use when it comes to the case of Greece”, said Rehn, who referred to an article by IMF chief economist Olivier Blanchard in Sunday’s Kathimerini that said it was a “fundamental misreading of historical record” to suggest the Greek programme had veered off track because it was badly designed.
Rehn suggested other factors affected the Greek programme, such as “persistent uncertainty and problems with implementation” at the start of the programme that blocked the “confidence effects” which would have lessened the impact of austerity. Rehn also suggested the IMF’s analysis was not broad enough and that several other factors came into play, such as a general economic downturn in the eurozone.