July 30, 2021

The IMF softened its 2012 report on Spain to avoid generating alarm | Economy

The IMF softened its 2012 report on Spain to avoid generating alarm | Economy

On July 26, 2012, the meeting was held in which the International Monetary Fund (IMF) prepared the Spanish version of Article IV, the document that the body writes every year to reflect the strengths and weaknesses of each country. The minutes of these conversations, which EL PAÍS has had access to, are especially interesting for showing the guts of the analysis that was made of a country that was suffering one of the most virulent crises of the last decades, with a rescue to the banking approved only one month before.

The exchange of opinions between the people in charge of the Fund, already then directed by Christine Lagarde, shows that then it was decided to lower the tone in some aspects so as not to generate a greater alarm than what already existed in the markets and in the media, when Spain was the great concern of Europe. And how this decision aroused criticism from some members of the IMF Council.

"Our president is concerned about some modifications and deletions of the report, specifically those that significantly reduce the tone of the risk analysis. The advice [del FMI] he insists on the importance of warning countries of the risks, but these warnings have been lowered considerably ", fired the Brazilian Jose Pedro Fachada, with the rank of executive director in the Fund. It also added that, according to the agency's transparency policies, only information that is not in the public domain can be suppressed, and all the data deleted was already known.

Market sensitivity

"I disagree with Mr. Fachada. It seemed to our president that the corrected version was more appropriate, "said Thanos Catsambas, one of the executive directors of the Washington-based agency. But it was Martin Mühleisen, director of the Department of Strategy, Policy and Analysis, who went deeper into the matter.

"The goal was not to change the message of the report. The text is honest with the risks, "Mühleisen said. The censored information did not add any value or modify the general message, he said. And he justified the changes for reasons of "market sensitivity". "[Los contenidos modificados] they could be misinterpreted by the public and would have given heart to journalists eager to exaggerate the message of the Fund, "he added.

The moment was especially complicated in Spain. Between January and May of that year, the risk premium had climbed from 300 to 550 points. The Bankia hole was seen as one of the biggest problems that could drag the eurozone. Shortly before, the Government of the PP – and very especially its minister of Economy, Luis de Guindos – had pressed so that the IMF anticipated its report on the Spanish banking to accelerate the intervention of Bankia.

According to Jordi Sevilla, former socialist minister and current president of Red Eléctrica, in his book Six months that led to the rescue, the resistance to leave Rodrigo Rato, then president of Bankia, and the doubts of the Government to force its march ended up precipitating the European rescue of more than 40,000 million for the Spanish financial system.

Just a month after the European aid program, IMF representatives discussed how far they should carry the inks in their analysis of the situation. One of the horses of battle revolved around a change of word: from "bleak"-Term that can be translated as desolate or gloomy- went on to describe the Spanish situation as"very difficult" [muy difícil].

"I do not want to discuss a word. But [en el cambio de la evaluación de desolador a muy difícil] the procedure was not followed. This does not comply with the transparency policy, "Mühlesein insisted.

The reluctance of the Fund to add fuel to the fire to catastrophic headlines about the future of Spain was only half fulfilled. "The IMF foresees a lost decade for the Spanish economy," the newspaper said in April 2012.

"Financial tensions have created an immense crisis"

The minutes of the IMF meeting in July 2012 show how worried Spain was at that time. Although the assistants approved mainly the measures promoted by the Government of Mariano Rajoy, they doubted that they would be enough to straighten the course.

"Europe has decided to rescue the financial system of Spain. We are glad of this decision. But the financial tensions have become a crisis much wider and immense, "says one of the participants in the meeting, which painted a catastrophic situation in which the central government had to rescue the municipalities. "At this point, we need unconventional measures. And the authorities should consider requesting a broader financial assistance program to prevent a worsening of the situation, "they added. This total rescue – in the image of what had previously been requested by Greece, Ireland and Portugal – that were then shuffled in the IMF was finally avoided by the Spanish Government.


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