SEOUL – Asian countries have been watching the Greek crisis unfold with a mixture of envy and schadenfreude. When they experienced their own financial crisis in 1997, they received far less aid, with far harsher conditions. But they also recovered much more strongly, suggesting that ever-growing bailouts may not be the best prescription for recovery.
Since the onset of the crisis, Greece has received massive financing from the so-called “troika”: the European Commission, the European Central Bank, and the International Monetary Fund. It received bailout packages in 2010 and 2012 totaling €240 billion ($266 billion), including €30 billion from the IMF, more than triple Greece’s cumulative limit for IMF borrowing. The latest deal promises up to another €86 billion.
By contrast, South Korea’s 1997 bailout package – which was larger than those received by Indonesia, Thailand, or the Philippines – totaled $57 billion, with $21 billion coming from the IMF. At the time, South Korea’s annual GDP was $560 billion; in 2014, Greek GDP amounted to less than $240 billion.
The IMF seems to have lent Greece such a large amount for political reasons. For starters, at the onset of the crisis, then-IMF Managing Director Dominique Strauss-Kahn was a leading candidate to become President of France. More generally, major IMF shareholders, the European Union, and the United States have a vital interest in stabilizing Greece to safeguard French and German banks and preserve NATO unity. Desmon Lachman, a former deputy director of the IMF’s policy department, has called the institution a slush fund, abused by its political masters during the Greek crisis.