GREECE AND THE

G

REECE AND THE

I

NTERNATIONAL

M

ONETARY

F

UND

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UNIVERSITY OF GRONINGEN AND UNIVERSITY OF UPPSALA

Master Thesis by Efthymia Konstantinou Student Number: 1941445

Supervisor: Dr. W. Westerman Co-assessor: Prof. Dr. C.L.M. Hermes

March, 2011

2 | P a g e Acknowledgments

3 | P a g e Contents

GREECE AND THE INTERNATIONAL MONETARY FUND. ... 1

Acknowledgments ... 2 Abstract ... 5 Chapter 1 ... 6 Introduction ... 6 Chapter 2 ... 12 Literature Review ... 12 2.1 Keynesian economics ... 12 2.2 IMF policies ... 19

2.3 Greece and the IMF plan ... 25

2.4 Policy adjustments ... 31 Chapter 3 ... 34 Methodology ... 34 3.1 Questionnaire Design ... 35 3.2. Data ... 36 3.3. Reasons of interest... 37 Chapter 4 ... 38

Results and analysis ... 38

Chapter 5 ... 52

Conclusions ... 52

References ... 57

Part 1: List of Appendices and Tables ... 60

Part 2: Appendices and Tables... 61

Appendix A: Main Comments by selected Authors ... 61

Appendix B: Questionnaire ... 63

Appendix C: Overall answers ... 66

Table 1: Overall Answers ... 66

Appendix D: Answers of the male respondents ... 73

Table 2: Male respondents ... 73

Appendix E: Answers of the female respondents ... 80

Table 3: Female respondents ... 80

Appendix F: Answers of the Ages 20-39 ... 87

4 | P a g e

Appendix G: Answers of the Ages 40-60 ... 94

Table 5: Group Age 40-60. ... 94

Appendix H: Respondents with Bachelor Degree ... 101

Table 6: Respondents with Bachelor Degree ... 101

Appendix I: Respondents with Master Degree ... 108

Table 7: Respondents with Master Degree ... 108

Appendix J: Answers of Students respondents... 115

Table 8: Students’ responses ... 115

Appendix K: Answers of Professionals respondents ... 122

5 | P a g e Abstract

6 | P a g e Chapter 1

Introduction

Much ink has been spilled on the economic crisis of 2007-2009, and its subsequent roiling of world credit and stock markets. Yet, historians and economists have only begun to crack the surface of the causes of this crisis, and therefore there is plenty of ground for deep study. Europe is probably the final stage of this world economic recession. The financial crisis made many governments to provide extensive support to their financial sectors, especially in advanced countries. Measures including capital injections, asset purchase and protection schemes, guarantees, provision of liquidity and other support by central banks, and expanded deposit insurance coverage are only a sample (IMF G-20 report, 2010). Although some countries had very low or no fiscal cost (equity injections, debt assumed by the state and asset guarantees, liquidity support for financial institutions, lower tax revenues, higher government spending due to a crisis recession), in other cases, costs unrecovered as of end-2009 were high: 6.1 percent of GDP in the United Kingdom, 4.8 percent in Germany, and 3.6 percent in the United States (IMF G-20 report, 2010).

While the crisis still takes place, having very bad consequences on the employment rate, the European Union applies diametrically opposed policies from the ones the Obama government practices. The government of the United States, for example, has proposed a Financial Crisis Responsibility (FCR) fee to recover intervention costs (IMF G-20 report, 2010). Banks and thrifts, insurance and other companies that own insured depository institutions and broker dealers with assets of more than $50 billion would be subject to an annual levy of 0.15 percent on—as initially proposed—total liabilities excluding Federal Deposit Insurance Corporation (FDIC)-assessed deposits and insurance policy reserves, as it is stated in the IMF report for the G-20 in 2010. Strict austerity policies and cuts in the government expenses characterize the official European Union’s economic policies, at the same time when Washington invites all governments of the developed countries to amplify the economy with expansive measurements of fiscal policy. Many propositions for cost recovery from the crisis have been suggested and some of them claim the limitation of the use of tax losses, built up by financial institutions during the crisis (IMF G-20 report, 2010) while others suggest some sort of a financial transactions tax (FTT) (IMF G-20 report, 2010).

7 | P a g e accounting year 2009, was also charged at 50 percent above a broadly similar threshold, and is projected to raise about €360 million (IMF G-20 report, 2010). In contrast to the FCR fee, these schemes are not intended to recover any specific amount. In other words, as De Grauwe (2010) has mentioned, Europe allows to the financial markets to dictate the fiscal policies they are going to follow. According to De Grauwe (2010) this situation is taking place because the European governments are not disposed to react to the pressure the financial markets put. This was obvious in the beginning of the crisis, and as a result the markets eliminated the more weak members of the EU, such as Greece and “attacked” them. Continuing, the EU in the case of Greece reacted very late and then markets targeted Portugal and Spain. The problem according to Paul De Grauwe is the lack of political union and political leadership, something that was obvious during a big crisis like this one.

Greece being a member in the EU follows the same policies and it would not have any matter to study about this specific country if she had not asked financial help from the International Monetary Fund (IMF) as well as from the rest of the members of the EU because of her economic difficulties she is faced with. On April 11, 2010 the finance ministers of the EU admitted that in 2010 they will provide Greece with 30 billion Euros of three- year loans if the nation requests the cash. In a statement, IMF Managing Director Dominique Strauss-Kahn said the talks “… could provide the basis for fund financial assistance, under a multi-year program, in the case that the authorities decide to ask for such assistance.” Greece’s decision to initiate “… fund program engagement is consistent with the agreement among European leaders that financial support from members of the euro area should go hand-in-hand with IMF engagement and financial assistance…” he said (www.bloomberg.com).

8 | P a g e Strauss-Kahn of France manages the institution. He began serving on November 1, 2007, and his term will end after five years.

The Fund’s legal authority is described by an international treaty, “The Articles of Agreement” (Articles or the Agreement) and came into force in December 1945. The first Article in the Agreement outlines the purposes of the Fund and, although the Articles have been reformed several times, the first Article has never been altered. The IMF started financial operations on March 1, 1947. Between 1947 and 1948, eleven countries became members in the IMF, whereas from 1950 and for some years later there were no drawings. During this time the Fund worked on its policies. One outcome was the stand-by arrangements, established in 1952, modified in 1956, and reviewed periodically since then (www.imf.org). “Stand-by arrangements provide a procedure for drawing on Fund resources with conditions based on a structural adjustment program for the borrower country” (www.imf.org). Stand-by arrangements became the model for other lending procedures designed by the Fund to meet the needs of its members.

By the mid-1970s, the Fund found itself becoming more of a lending institution than originally envisioned (www.imf.org). A big test for the IMF and its members was during the oil crisis in 1973-1974, when the Organization of the Petroleum Exporting Countries (OPEC) quadrupled the price of crude oil. This situation had as a result inflationary pressures in industrial countries and payments deficits in many developing countries. Because of the exit of the US of the gold standard in 1973, the old exchange system collapsed. The new system did not need the IMF, and the organization faced a crisis of purpose (Pastor, 1987, 14; de Vries, 1986, 222). However, the IMF’s purposes also included ‘‘providing members with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity’’ (www.imf.org). Throughout the 1980s the Fund played an increasingly larger role, not only as "lender-of-last-resort," but also as mediator with debtor countries in relation to creditor nations and private banks. The IMF transformed itself from a currency regulating institution to an international organization involved in the national policies of much of the third world, particularly from 1982 onwards.

9 | P a g e being too oriented to the industrial economies and not adapted to developing economies. In 1989 the Fund developed new debt reduction guidelines, including commercial bank debt and debt service-reduction operations by member countries (www.imf.org).

However, many people claim that the IMF programs introduce only austerity policies and the results they have are only short termed. These conditions typically entail fiscal austerity such as cutting government expenditures and increasing taxes. Increasingly, the IMF advocates strict structural adjustment policies as the primary condition for obtaining future loans from any source. These policies typically entail currency devaluation, reduced government spending, lower wages, and freer trade (Harris, 1986; Loxley, 1986; Singh, 1986; Nelson, 1988). Contrary to Conway (1994), countries that emerge from IMF programs do not grow faster than they did before having entered them or faster than countries that never entered. Governments facing economic difficulties adopt IMF programs either because they are desperate for foreign reserves, or because they want to use the IMF as a foil to reduce budget deficits, or both (Przeworski and Vreeland, 2000). In 1994, the year of the IMF's fiftieth anniversary, NGOs put together a coalition claiming that "Fifty Years Is Enough" (Graham Bird, 1996), because they argued that IMF policies did more bad than good in the countries. Another criticism has been that the financial programs the IMF uses are too static, without considering the time lags and uncertainties that exist in the adjustment process. Moreover, the model clearly is oriented toward Balance Of Payments (BOP) stabilization rather than toward economic growth (Bird, 1996).

10 | P a g e Why is Greece heavily in debt in the foreign countries? The external debt of Greece, which is the amount Greece owns to the foreign countries, was in 2009 in percentage of 82,5% of GDP (Cabral, 2010). The deficits of the State Budget are covered by lending. Due to the big deficits from the financial management the last three decades and the high interest rates during the 1980s and 1990s, the total amount of the Greek public debt enormously increased. The big deficits inflated the public debt and the need for the interests’ payment inflated the deficits. The interests and the other expenses for the service of the public debt were absorbing a significant percentage of the revenues of the state budget and were eliminating the possibility of the decrease of the deficit. The money Greek government was borrowing, drained from the government to the citizens in various ways, for example through the payments of the public sector, payments to the government’s suppliers or the pensions. The country was more in debt through the 2000s because she was importing more than she was exporting, even though she was having smaller amounts of capital inflow from the European Union and was already in debt and also because of the organization of the Olympic Games in 2004. Government bonds were not a sufficient source of income for the Greek government and therefore the country continued her borrowing. The consequences of this situation are more adverse since the deficit was not created for investments but for the coverage of consumption expenditures of the State. The only period that the public debt started to decrease was in the middle of 1990s, since Greece was about to enter the European Monetary Union.

The problem Greece is now facing is the combination of a high debt, a big deficit and low competitiveness. The combination of these factors is to blame for the fact that Greece can borrow only with very high interest rates in the financial markets. For the payment of her debt, she must succeed in two fronts; first there must be an improvement to the public financial and the government must have an important primary surplus. Second, the economy must become more competitive. The success in both fronts premises great reforms. The ones that refer to the public economy include frugality measures, for example tax increase and cutting of public payments. These measures will have a good result only when more radical reforms will follow with an intention of the increase of the competitiveness of the economy and the effectiveness of the public sector. The agreement between Greece and the IMF is on the payment of her debt. Some of these reforms contribute to this target by improving the public economy whereas others lead to the increase of the competitiveness and development.

11 | P a g e said to have two alternatives: the first "chacun pour soi" beggar-thy neighbor solutions; or the second - enhanced, pragmatic, sensible European cooperation for the benefit of all to preserve an open world economy (De Larosière, 2009). This will bring undoubted economic gains, and this is what everyone favors. Europe suffers from a problem in comparison to all single jurisdictions: the lack of a consistent set of rules. So, the main question of this study reads as follows:

Considering the current economic situation in Greece, was the help by the International Monetary Fund and the implementation of its policies the best solution for the country in order to lead her to financial recovery?

In the thesis the measurements IMF suggested to Greece in order to improve her today situation will be described. The IMF plan as it is clear includes austerity policies but the thing that will be discussed is whether or not austerity policies are necessary to restore growth. There will also be reference in other countries that IMF has helped or “not” and therefore make a comparison between them and Greece today. As from July 2007 and onwards the world faced an economic crisis, and still does, and it is considered to be one of the most serious and disruptive financial crisis since 1929. It will also be discussed which problems Europe faces with the ways of leadership she follows and if they are effective in an economic crisis like this. To prevent the recurrence of this type of crisis, a number of critical policy changes are called for. In order to prove if a change in policies would be successful there will be a reference to Keynesian theory and the points this theory brings up today. Failures of the financial markets will always happen, no matter what reforms will be implemented in order to improve market discipline or to strengthen regulation and supervision. However, the most important thing is that any future financial risks do not endanger again like this the whole economic system or the real economy.

12 | P a g e Chapter 2

Literature Review

2.1 Keynesian economics

This section mainly relies upon an article the Greek Professor Stournaras wrote in 2009 about the economic crisis and has an extended reference not only to the international financial crisis but also to the Keynesian economics and their ability to be adopted today under modification for the present’s circumstances. Suggestions are also provided for new forms of organizing related to the financial markets. For this part, publications from the International Monetary Fund’s library as well as articles of Bird Graham about the Fund and its performance are important.

Keynesian economics is a macroeconomic theory based on the ideas of 20th century British economist John Maynard Keynes. Keynesian economics suggest a mixed economy, where private and public sectors as well as the government play their role to the economy outcome. The central banks implement monetary policies whereas the government implements fiscal policy actions in order to stabilize output over the business cycle. Keynesian economics served as the economic model during the latter part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s (www.wikipedia.org). The recent global financial crisis in 2007 has caused a comeback in Keynesian thought.

13 | P a g e increasing economic activity. According to Blinder (2002), Keynes argued that the solution to the Great Depression was to boost the economy through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government helps income to be increased, which results in more spending in the general economy, which in turn leads to more production and investment, involving more income and spending.

The first and main thing governments should care about is the enacting of short and long run economic targets that will be quantitative as well as qualitative. In other words there should be a long run program for the economic policies as to be directions to the whole economy situation and to the governments’ expectations also. Unfortunately, very often there is no such program because there are people who faulty believe that the open economies can give directions or enact targets. One should not forget what Keynes said about the “animal prints” that beat the expectations and lead the markets, having a behavior of herd. The role of the government and of the public sector is crucial to the effective implementation of the economic targets, everywhere in the world. However, many nations have fiscal plans in response to the global, ongoing downturn now. The IMF usually advocates austerity policies, increasing taxes even when the economy is weak, in order to generate government revenue and bring budgets closer to a balance, thus reducing budget deficits. Countries are often advised to lower their corporate tax rate (Friedman, 2002). Different kinds of combinations have been used from all nations all over the world, such as government spending and tax cuts to give breath to their weak economies. Most of these plans are based on the Keynesian theory.

14 | P a g e A new European Stabilization Mechanism, announced 9 May 2010, has as a purpose to support confidence in Europe after a period of financial market stress, surrounded by concerns over government solvency in several countries (Debrun, Mathisen, 2010). The European Union and the European Central Bank (ECB) have adopted a package of measures to keep stable financial markets and support the reforms of European economies. The European Union has also committed to accelerating structural reforms, strengthen fiscal discipline, and establish a permanent crisis resolution framework. While there is a need for continued support for the recovery of the world wide economies and sovereign risks need attention, this is also the time to implement new long live policies and deal with short and long-term challenges. These challenges include getting public finances back on a sustainable track, reforming the financial system, and improving the efficiency of labor and product markets (Debrun, Mathisen, 2010). Europe faces the challenge of attracting new capital flows, and figuring out how to manage them in the right way (Debrun, Mathisen, 2010).

Since many decades’ governments were avoiding interventions in the economies, following neoliberal ways, all of a sudden the worldwide economic crisis brought the theory of Keynes alive again. From Washington until Beijing, from London until Bombay, and from Berlin until Sao Paolo, all governments tried to support the above economies (Stournaras, 2009). Increasing the public costs supported the employment and through tax exemptions and subsidies tried to hold the consumption and investments which were in free fall. The price of course for these policies was the increase of public lending, often to incredible high levels. In order all of these loans to be paid, the economies will need a lot of decades with high speed development, in order the governments to have high tax incomes and satisfying primary surpluses in their balance sheets.

Instead, the governments could increase the tax rates, burdening in this way either the households (taxing the individuals, indirect taxes) or the capital (taxing companies, more contributions for high incomes, taxes in financial trades). The households seem incapable of lifting any more weights. The higher taxation of the capital could give some solutions, but it would also be a big surprise, since over the last decades governments compete in investments attraction through the elimination of taxes to them.

15 | P a g e for the deficits started earlier. Among the big economies around the planet, the European Union seems to be more decisive to go back to the fiscal discipline and an example of this trend consists the “hard euro” (it is not by luck that the doubts even for an economy of the size of Greece, took from the euro an important part from its gains some time ago). Through this discipline it will be created a safe “shelter”, where the investors could resort, if the fiscal situation from the other big economies is out of control. The price will be the implementation of frugality policies to the working people of the European Union. In the European nations the markets and the society go along for a frontal collision, which in the first place are the “weaker members”, as for example, Greece.

Many analysts are speaking of the end of the neo-liberalism. Joseph Stiglitz made a comparison between the fall of the Berlin’s Wall and what this meant for the end and probably death of communism and the world economic crisis in relation to the death of the neo-liberalism. As Professor Stournaras has mentioned, this situation should mean the end of the belief that the markets, and especially the banking and the financial can be auto regulated. This idea has come to an end and if anything else a sign is the success of the Keynes theory. But this does not imply the return to an old form of statism. This means that all people want a government better, social, but not a government as an entrepreneur. Can someone say that the neo-liberalism is dying as an ideology, as a system of values in the base of which a world economic system is built on? The British historian Carr has a phrase in his book “What is History” (1961), where he says: “it is a pity that two of the biggest minds of the British economic policy, Adam Smith and Karl Marx, were wrong in two basic findings. Adam Smith believed that all the problems of the society will be solved by the invisible hand, and Karl Marx on the other hand, believed that the problems will be solved by the proletarians’ dictatorship” (Stournaras, 2009). This is a phrase that has everything in. Realism is needed. Therefore realism demands neither the invisible hand of Adam Smith, nor the Karl Marx’s proletarians and their dictatorship. These systems were tried and failed.

16 | P a g e The role of the banks is to take their deposits and make them loans. Many of these banks were taking these deposits and were playing these amounts to complex financial products, but in reality they were taking bets. This was inexcusable.

Here lies an explanation of the importance of the Glass-Steagall Act and the change of the law. If the banks get away from their basic role to transform the deposits into loans for the development of the firms and bestir themselves in a great degree in speculative activities, problems are being created in the markets. These problems come from the fact that the speculation has no limits, pyramids grow up, and these pyramids blow, like bubbles (Stournaras, 2009). This situation is very well described by a famous economist Charles Kindleberger, in a book that he wrote in 1978. His title was, “Manias, Panics and Crashes”. These three words explain how in two hundred years, that capitalism is the main theory to be followed, the economic cycles are explained by the buying mania for stocks, bonds, which is created from a favorable disturbance, for example, technological (www.tanea.gr). Therefore, acting like a herd, investors continue to buy until the prices have gone so up that everyone starts to sell like crazy. This causes the crash. First comes the panic and the damage afterwards.

Unfortunately, capitalism could not solve the problems caused by the non-regulation. Regulation is needed. If Alan Greenspan is to blame for something, was the fact that he believed that the banks could be self regulated, to measure the danger in a right way, but this is not what happened. The danger was not correctly calculated. And this is not the only thing that did not go well. There is an issue of partnership governance and an issue of speculation. There is also an issue of transparency and an issue of honesty between managers. When banks were giving loans to people they knew to become never in a position to be able pay them back, only for the managers to take extra bonuses and transfer these bonuses in organizations of the “shadow” banking system (hedge funds, private equity funds), without being regulated by the authorities, then is a matter of pure dishonesty (Stournaras, 2009).

17 | P a g e In the today’s situation the “shadow” banking system created values ten or twenty times more that the real economy. What someone sees now is that the turnover and the profits of the banking system and of the “shadow” banking system is usually out of control of the central banks. It has its base in off-shore countries and it may be two or three times more than the real GDP of an economy. All these derivative products created values that finally fell like a paper tower. However, from these values many people earned much money, bonuses, perhaps during the last ten years. In essence, the world financial system was similar to an economic federation, beyond borders, various governments, political systems and currencies.

The greatest lesson from this economic crisis is that the government should exercise control, and a strict one. Many countries that now are in favor of the government supervision, before the economic crisis refused to repeal the off-shore status, claiming that this regime gives their country profits. In essence, a more globalized supervisory system is necessary, due to the globalization. This is a role that the International Monetary Fund could play, even though it has made many mistakes in the past, but it also has the knowledge and the ability to do such a thing. A strict control regime and the elimination of the “shadow” situations are needed; either they called off-shore or funds that are not controlled from central banks. Although the crisis itself as well as steps for her deal showed the globalized character of the financial system, it seems in many cases that there are hesitations as to the measurements for the crisis to be in a globalized level (Stournaras, 2009).

18 | P a g e with the will to be distinguished and the latter with the Anglo-Saxon experience to make a sustainable plan, were the first to prove that. The German Chancelor Merkel was not in favor in the beginning, but it seemed that German banks had more problems than the other countries. The functionality of the system is such that effective cooperation will stem from effective global corporations.

At this moment there are global institutions but they do not work properly (Stournaras, 2009). An example could be the International Monetary Fund. What does the IMF mean? The G-7 (Canada, France, Germany, Italy, Japan, UK, US) define the agenda of the boarding meeting. Therefore it is the member countries that decide in the last place. The IMF’s role has been underestimated by its mishandles the last years. The Fund took actions that led countries to depreciations that should not be done. However it is a strong institution to which the countries give money, so it should play its role. The same is for the World Bank. The use of these bodies must the countries reexamine as well as the leadership of them. Many economists hope that Obama will not let them down and that he will be the leader that the world needs at this moment (Stournaras, 2009).

An important reform element is thus to find “institutional arrangements” to attenuate further the problems resulting from the specific nature of financial intermediaries and their close relationship with governments. In principle, there are two ways of doing this: (i.) Handing over responsibility to a particularly tough and independent body akin to a conservative central banker and (ii.) creating legal arrangements that force a more interventionist approach, in particular through prompt corrective action frameworks (Llaudes, Salman, and Chivakul, 2010). While the crisis has rightly convinced many governments that regulatory and supervisory responsibilities (rulemaking and monitoring) should be re-allocated to the strongest player available, which in many cases happens to be the central bank, the re-allocation of the responsibilities to supra-national bodies has stalled. Moreover, progress in the area of prompt corrective action has been limited or even non-existent. These are considered to be important gaps of current reform initiatives, in particular because there are good arguments to integrate resolution regimes with frameworks for prompt corrective action (Llaudes, Salman, and Chivakul, 2010).

19 | P a g e because capitals move so fast within seconds. And they are not defined from fundamentals but from the speculative standards. As an example can be given the fall of the British pound in 1992, when someone who had the economic power “destroyed” the Bank of England. These phenomena must be controlled today, and as a result there is a return to the ideas of the founding fathers, ideas which were democratic and they were compromising capitalism and democracy. This compromise was cruelly broken by the conversion of the heart of financial system to casino, in USA mainly but in Europe also.

As it is proven today the European banks were not less innocent. So, the matter of the capitalism and democracy compromise is on the table again today, but the question is by what means a result is going to be reached and these means must be present, respectively to the more globalized system and consider also the fact that in this system China is also in (Stournaras, 2009). Even though without China the world growth rate would be -2.5%, and now is 2.5, China is not in the G8 committee (Canada, France, Germany, Italy, Japan, Russia, UK, US) whilst there are other smaller countries in or countries that used to play a role to the world economy. In today’s economic structure, the architecture must change and become more open, more democratic and be conformed to the new economic data. There is an economic power transfer outside USA and probably outside Europe too, to countries that many name them“authoritarian capitalist”, but unfortunately, or not this is the reality. And probably it is better to have them in the system in order to be able to make them more democratic and make them adapt your own system in a positive direction (Stournaras, 2009).

The payment system is a public good today and it is the heart of the economy. It has a strategic role. Its role does not mean that it should be nationalized, but it means that it should be properly controlled. The nationalization of everything cannot make the government to function. A balance of motives on the one hand and a balance of supervision on the other is needed. As a result the payment system is a public good and that is why the central banks exist and the globalized regulative authorities must be created. A fall of the payment system will result in the fall of the social governments and their economies. Keynes is considered to be the economist of the 21st _{century, but} history did not exonerate him in the sense that he was the negotiator of Great Britain in Bretton Woods and he failed. He mandated that “we gave blood, US should give the money”, something that never happened (Stournaras, 2009). 2.2 IMF policies

20 | P a g e many others all over the world. The IMF considered Argentina to be a model country before experiencing a catastrophic economic crisis in 2001, which some believe that this crisis has been caused by IMF due to induced budget restrictions and privatization of national resources. Argentina and other South American countries blame the Fund for the region's economic problems (www.wikipedia.org). Another example of where IMF Structural Adjustment Programs did not have the expected results was in Kenya. Another indication of the mistakes of the IMF programs is in an interview of the former Romanian Prime Minister Tăriceanu, who stated that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances" (Mediafax, 2005).

The International Monetary Fund has been criticized in the past for the austerity policies that implemented in the countries that have asked for its help with the stabilization of their economy. The criticisms did not come only from the countries that the IMF helped but also from the inside of the Fund. One of the basic critics in the end of 90’s was Joseph Stiglitz, one of the members of the Fund. Below there are presented cases of countries the IMF helped in chronological order, starting from 1976 until today. A larger attention is paid to the case of Argentina as it supposed to be the most characteristic failure example of the International Monetary Fund.

Great Britain (1976): The sterling collapse compared to the dollar in 1976, led the country to a political and economical crisis. The government of the Labor Party was forced to ask help from the International Monetary Fund, which until then it helped only Third World countries, and asked for 2,3 billion pounds. The price was a heavy one, as the Fund asked from London painful cutting of government expenses (www.tovima.gr).

21 | P a g e obliged to follow the same monetary and currency policy with that of USA, while the differences between these two economies were obviously very big.

As a result, when the first clouds came after the crisis in the Southeast Asia and the failure of Russia, Argentina seemed to have a very big problem of competitiveness, a situation that was leading her to economic depression. The problem was becoming bigger and bigger, because after 1998 the US dollar was appreciated rapidly and at the same time the Brazilian currency which was the basic trade partner of Argentina was depreciating. In order Argentina to gain competitiveness, she should let her currency to be very depreciated to the US dollar, but the government and the IMF insisted in the impasse economic model, because they were afraid that a change in the currency policy would led to many capital outflows. The “injury” for the IMF was a big one because Argentina set the Fund as the one with the biggest responsibility for the economic downturn of the country which drove unemployment rate above 20% and more that 15 million people to poverty (www.tanea.gr).

In December 2001, before Christmas, the government of Argentina announced the reduction of the payments of the public employees by 20% at the same time that it forbid money withdrawal from the banks in access of more than 50 than their deposits. These measurements were the last hit for the citizens in Argentina, as it was in compliance with the three previous years that had driven their life quality to a very low standard. There were violent incidents in the country followed by the resign of the government. While the new government acted in panic, it announced the stopping of payments due to the external debt of 140 billion dollars and the depreciation of the Argentinean peso in accordance to the US dollar.

The main mistakes of the IMF according to the Fund’s report, was the fact that the disengagement of peso with dollar was not on time, so as the depreciation conditions of the country to become smaller, the lack of important structural changes in the economy, the lax monitoring of the fiscal policy and the wrong estimation of the debt that can be sustained in a developing country that has limited access to the international financial markets.

22 | P a g e Mexico (1995): The International Monetary Fund cooperated with the Ministry of Finance in the US for the loan of 30 billion dollars in 1995. The result of the reforms the Fund implemented was 50% of the citizens to live under poverty conditions and the lowest wage decreased 20% (www.tanea.gr).

Asian Crisis (1997-1998): The time that the domino of the Asian crisis is about to reach Japan, the IMF gives 55 billion dollars to Korea, 17 billion to Thailand and 23 billion to Indonesia. It was until then the biggest rescue of the Fund and it was accompanied from the program SAP (Structural Adjustment Policies), in which there are introduced austerity policies, such as the cutting of the government expenditures, the increase of the interest rates, the decisions withdrawal for the trade protection, the restructuring of the financial systems, and the liquidity of the untrustworthy firms. The programs caused important currency depreciation, a wave of failures, a dramatic loss of jobs and price increases in the everyday products, sparking social turmoil and violent events (www.tanea.gr).

Turkey (2004, 2000, 1999): Turkey has received repeatedly loans from the IMF. Few examples are the 4 billion dollars the country borrowed in 1999, the 7,5 billions in 2000, and the three-year program of 10 billion dollars which was agreed in 2004. The Fund considers that its intervention in Turkey’s economy is successful, but due to its strict rules, it is a “red bull” for the Turkish, with a result of regular protests. As a result mister Erdogan was avoiding asking help from the IMF during the latest economic crisis, knowing that the Fund’s austerity policies would have political costs for his government (www.tanea.gr).

Russia (2008, 1992): The history between IMF and Russia is a long one. The country borrowed 20 billion dollars from 1992 until 1996 and another 41,5 billion dollars in 2008, but according to the Fund, Russia did not move to the necessary reforms. The wrong economic policies and the ill-treatment (many of these billions were stolen), led the country to failure (www.tanea.gr).

Iceland (2008): Iceland was the first industrial country that asked help from the IMF after Great Britain in 1976. Under the failure threat, Iceland took a loan of 2,4 billion dollars in 2008. The Fund, on the other hand delayed the first installment, asking from the country to compensate first Britain and Netherlands for the money their citizens lost in the Iceland’s banks. In parallel, the Fund implements strict conditions such as the 10% decrease of the ministry expenses and the increase of the interest rates (www.tovima.gr).

23 | P a g e demands of the Fund for cutting of government expenses, selling of banks, and enhancement of the financial system forced the country’s political crisis. When the Fund realized that the conditions were not implemented, it froze the cooperation with the country (www.tanea.gr).

Pakistan (2008): The country of Pakistan took a loan of 11,3 billion dollars in 2008. In exchange, she cut back the subsidies in energy, oil and fertilizers, to decrease the government expenses, to increase the taxes and the interest rates (www.tovima.gr).

Hungary (2009): The increase of the interest rates, the elimination of the 13th _{salary in the public sector and the cutting expenses of the ministries were a} few conditions that the IMF implemented to Hungary for giving her 25 billion dollars (www.tovima.gr).

Serbia (2009): Serbia needed a loan of 3 billion Euros to overcome the crisis of 2008. In order to get this money, she agreed to very strict rules, such as the loss of 1/5 of the 70000 jobs in the public sector as well as the freezing of the payments (www.tovima.gr).

Romania (2009): The austerity policies that the IMF implemented for a loan of 20 billion Euros, caused the fall of the government causing the suspension of the disbursement of the installations. The flow of the financing seems to be restored, as the new government approved measurements such as the connection of inflation with the pensions, in accordance to the average wage rates (www.tovima.gr).

24 | P a g e On 7 March 2010 the newspaper “Eleftherotypia”1 _{had an interview with} Arthur MacEwan, peer professor of Economics and senior fellow in the Centre of Social Politics in the University of Massachusetts in Boston. Referring to the IMF he said: “… the programs of the structural adjustment of the IMF have a very bad history. Wherever they are implemented they have offered the minimum of an economic recovery and very often they have contributed to an even bigger income inequality. The nonsense on which the IMF insists that the governments should be based in order to eliminate their deficits in periods of crisis consist a recipe of failure. It is exactly the opposite from the kind of policies that have helped rich countries to overcome the turmoil. The impact of the policies of the Fund in the total demand is awful by its own, but these policies are often implemented against the more vulnerable members of the society. Furthermore, the structural programs of the IMF lead the countries that implement them deeper in the neo-liberal policies of the economic development”.

From the above examples it can be stated that the IMF is implementing conservative economic programs that advocate free trade, open markets, and other policies that facilitate increasing development for wealthy countries. But a statement of Deputy Director of the IMF's European Department Mister Chopra, in a press release of the IMF, gives an example of what the IMF considers to be the right policies that should be implemented for the governments’ reforms. He says: “No doubt fiscal consolidation is necessary virtually everywhere following the sharp deterioration of public finances in the wake of the great recession. But it will be important for governments to optimize the composition, the credibility, and the phasing of adjustment so as to minimize the economic fallout. Essentially, it will require that consolidation should focus on selected expenditure items and be embedded in medium-term plans and phased according to country-specific circumstances” (www.imf.org). He continues, “… the key in the financial sector is to strengthen bank balance sheets and enhance confidence… Europe has a very integrated financial market, and what this means is that it will require a strong supervisory framework with enhanced cross-border cooperation which we see as another essential element for building confidence” (www.imf.org). Finally referring to the structural policies’ reforms, he stated: “The IMF has been advocating steps to liberalize product, service, and labor markets in advanced Europe for quite some time now. This is not a new emphasis for us. We see these structural reforms in these areas as holding the key to unlock dormant growth potential in Europe… Now reenergizing the push for structural reform, for example in the context of Europe’s 2020 strategy, is therefore more important than ever” (www.imf.org).

25 | P a g e Bird (1996) proposes some changes for the better implementation of the IMF programs. Some of them are stated below. The Fund should encourage governments to make their own program for which they would then ask for Fund support. Furthermore, the programs from the IMF should have a strong growth orientation and structural adjustment. More research should be done by the organization for the causes of the economic instability as well as the economic growth in the country that asks for help and maybe it is necessary to expand the country’s time plan (Bird, 1996). These propositions will be taken into consideration next and be compared to the policies the International Monetary Fund implements.

2.3 Greece and the IMF plan

As it was stated earlier, the IMF and the EU on 11 April 2010 provided Greece with a loan of 110 billion Euros over three years in order to help the country to come out of the difficult financial situation. The SBA, which was approved on May 9, 2010 (IMF Press Release No. 10/187), is part of a cooperative package of financing with Euro area member states amounting to €110 billion over three years. It entails exceptional access to IMF resources, amounting to more than 3,200 percent of Greece’s quota, and was approved under the Fund's fast-track Emergency Financing Mechanism procedures. Greece from her part has to proceed in fiscal, structural and financial adjustments in order to be able to pay back the loan. Therefore, in this section there are presented the adjustments the Greek government made and the ones that she has planned for the future, under the guidance of the IMF. The data given below were taken from the official report the Greek Minister of Finance, Mister Papakonstantinou, and the CEO of the Central Bank of Greece, Mister Provopoulos, have sent to the IMF. The reforms presented below are until the 10th _{January 2011. From now on the official report from the Prime Minister and} the CEO will be cited as “Greek report”.

With the budget deficit at 15.4 percent of GDP and public debt at 127 percent in 2009, the Greek government must implement drastic fiscal, financial and structural measures in order to avoid the further increase of the debt. The most important elements of the adjustments are:

• Fiscal policies. The final target of the fiscal consolidation will be for the government to get the general deficit under the 3 percent level by 2014 (compared with 15.4 percent in 2009).

26 | P a g e reduced and frozen for three years, with payment of Christmas, Easter, and summer bonuses workers abolished, but with protection for the lowest-paid. • Government revenues. The raise of the value-added tax and tax on luxury items, tobacco and alcohol will give the government savings of 4 percent of GDP through 2013.

• Revenue administration and expenditure control. The Greek government lacks in tax collection and as a result with the new reforms it is going to improve this procedure. Therefore the government will try to raise contributions from those who have not carried a fair share of the tax burden (IMF report, 2010). People with large income will pay more than they used to. It will also strengthen budget controls. The total revenue gains and expenditure savings from these structural reforms are expected to gradually total 1.8 percent of GDP during the program period.

• Financial stability. A Financial Stability Fund, funded from the external financing package, is being set up to ensure a sound level of bank equity (IMF report, 2010).

• Entitlement programs. Government entitlement programs will be shortened; some social security benefits will not be given any more while the most vulnerable will keep some benefits.

• Pension reform. Comprehensive pension reform is proposed, including by curtailing provisions for early retirement.

• Structural policies. Government must change completely the public administration, strengthen labor markets and income policies, improve the business environment, and divest state enterprises (IMF report, 2010).

• Military spending. The plan envisages a significant reduction in military expenditure during the period, since military spending in Greece exceeds the average of the largest EU countries.

Fiscal reform policies

27 | P a g e order to secure tax revenues and to promote the overall fairness of the adjustment program.

o Under-execution of spending: From January until June the government under-executed state budget primary spending by €5.6 billion (Greek report, 2010). The expenditure containment will give priority to the required transfers to the social security funds and local governments to allow them to become current in their payments and also focus on operating expenses.

o Strengthening of the fiscal management framework. The budget for 2011 will be part of a three-year rolling medium-term framework, and the Minister of Finance will be able to set expenditure limits for the ministries, local governments and social budgets. Also, the budget will now contain amounts of money for emergencies to facilitate absorbing shocks (Greek report, 2010). In addition, the government is also developing monthly fiscal reporting for general government entities. o Focus on bolstering tax administration and fighting tax evasion.

Improving tax administration is necessary for fairness in the adjustment program as well as broadening the tax base, with moderate average tax rates. The government will start the improved tax administration by implementing the recommendations received from technical experts:  ensure prompt implementation of the new tax legislation,

 collect tax arrears,

 reorganize the large tax payers unit,

 strengthen the audits for high-wealth and income individuals,

 strengthen filing and payment controls, and improving tax payer services.

Meanwhile, the government will make intensive use of payments receipts to strengthen tax compliance, and cross-check tax information with data on wealth and spending habits to reduce tax abuse and evasion in particular of high-income and wealthy tax payers (Greek report, 2010).

o Public administration reform is advancing. The government is setting up a single payment authority through which wages of civil servants in central government will be paid by end 2010 and for government in general by March 2011 (Greek report, 2010). In 2011 the governments intends to move to a simplified remuneration system which will be facilitated by the completed public employment census. Public administration must become more efficient and that will be done by a review of the central administration.

o Limit risks in governments’ programs, and strengthen expenditure control in sub-national entities.

28 | P a g e has reduced procurement prices of pharmaceuticals by 20 percent by implementing price caps for approved drugs lists, and improved profiles and benchmarking for patients and doctors to avoid unnecessary prescriptions, which should yield important savings (Greek report, 2010). From 1st _{January all the drugs have a 6% VAT.}  Local governments. The recently passed Kallikratis bill for local

government reform will sharply reduce the number of local administrations, entities, and elected and appointed officials. The government will secure improved budgetary results of €500 million subsequently in each of the three years during 2011-13 (Greek report, 2010). To ensure that those savings contribute to the overall fiscal consolidation of general government, the government will limit borrowing, reduce transfers, and control local government budgets in compliance with the fiscal plan.

 State enterprises. The government will strengthen performance of the major loss-making public enterprises by making them more efficient, increasing tariffs in public transportation and reducing inexcusable allowances and overtime. The purpose of these measures is the reduction of contingent risks to the budget. The 10 largest loss-making enterprises will have their financial statements through 2009 published on the web before end-September (structural benchmark) to enhance transparency in their financial condition. Until now the transport financial statements are on the web.

o Substantial pension reform. A pension reform introduces a new system consisting of a contributory pension to top-up a non-contributory, means-tested, basic pension, aiming to control the increase in pension spending (Greek report, 2010). Until now, the pension reforms have reduced the projected increase in pension spending, but a lot of work is still to be done on auxiliary pension and welfare funds.

Structural reform policies

Progress is being made on structural reforms. Until now a pension reform has taken place and substantive labor market reform is also underway. Here are presented the reforms that are scheduled for implementation.

state-29 | P a g e owned enterprises, and promote the absorption of structural funds (Greek report, 2010).

o Labor market reform is almost completed. Substantive legislative changes were introduced in July 2010 easing employment protection legislation and collective dismissals, reforming minimum wages, reducing overtime premium, and allowing firm-level agreements to prevail over other levels (Greek report, 2010). Alongside reforms in public employment in order to reduce labor-market distortions, are planned. These reforms will increase adjustment capacity of firms, ultimately boosting employment (Greek report, 2010). Further measures will be taken to reform collective bargaining, including the elimination of the automatic extension of sectoral agreements to those not represented in the negotiations (Greek report, 2010). Finally, the government will adopt legislation to introduce symmetry in the arbitration system while strengthening its independence and transparency (Greek report, 2010). o Reform and/or privatize state-owned enterprises:

 Railways. There is a draft enabling law to restructure the railway sector and, in parallel, the government will approve a business plan with time-bound actions. Cost reductions aim at significantly reducing fiscal pressures from the enterprises, while making the train operator profitable for the fiscal year 2011 (Greek report, 2010).

 Energy. The government will enable the effective liberalization of the wholesale electricity market and proceed with the rationalization of tariffs while ensuring vulnerable groups are protected.

 Other state-owned enterprises. Privatization could boost domestic and foreign direct investments and stimulate growth. The authorities plan to raise at least 7 billion Euros over the next 3 years (3 percent of GDP) with the process of privatization. Only in 2011 the government plans to raise 1 billion Euros as 14 public companies have been already identified for full or partial privatization.

o Increase competition and achieve a rebound in growth:

 Restricted professions. Pervasive restrictions to entry in a number of important professions impose high costs on the economy. As a first step, the government will remove barriers in the legal, pharmacy, notary, architecture, engineering, and auditing professions. This will include reducing licensing requirements, geographic restrictions, and regulated tariffs (Greek report, 2010).

 Services sectors. An ambitious and strategic implementation of the EU Services Directive will be pursued. In road freight transport, the government will seek approval for the law that removes restrictions on licenses and liberalizes prices.

30 | P a g e unnecessary fees (Greek report, 2010). On licensing, legislation will be adopted to simplify and accelerate the authorization for enterprises, industrial activities, and professions. Remaining restrictions to business activity and innovation will be identified and an action plan (“business friendly Greece”) will be formulated to remove the most important ones (Greek report, 2010).

 Tourism and retail. The government will also commission a report analyzing the potential contributions of tourism and retailing to growth and jobs, and follow up with pointed actions and legislation. These are high potential areas regarding investment, exports and price and competitiveness improvements. The government plans to fully incorporate the liberalization principles set out in the EU Services Directive into Greek legislation (Greek report, 2010).

 HCC. The government will amend the Greek Competition Act to strengthen the independence of the Hellenic Competition Committee and increase its effectiveness (Greek report, 2010).

o The absorption of structural funds will be raised. To enhance the growth impact of funds, recourse to non-targeted de minimis state aid measures will be gradually reduced (Greek report, 2010). The government will adopt legislation to tackle delays related to environmental, archeological and expropriation impediments.

Financial reform policies

In the financial sector, there has been a moderate deterioration in capital adequacy as nonperforming loans have increased in line with expectations (Greek report, 2010). Recently, the CEBS stress tests covered more than 90 percent of Greek banking system assets and all but one state-owned bank passed, thus helping to reduce market volatility. The government has commissioned a strategic review for the banking sector both the private and the state one. The Financial Stability Fund (FSF), which will be in operation, will provide an important backstop to deal with potential capital shortfalls. Continued close monitoring of the financial sector will be important in the period ahead.

31 | P a g e Mr. Chopra: “Let me emphasize that the program with Greece has made a very strong start, but, of course, risks remain. The first point I would highlight is that the fiscal consolidation is on track… I think there’s still more work that needs to be done to make sure that this consolidation gets broadened to other levels of government… The second point is that there’s been very ambitious pension and labor market reforms… And, thirdly, the Financial Stability Fund is ready to backstop capital needs in the banking system. The challenge will be to put fiscal adjustment on a sustainable footing, and also to overcome resistance to structural reforms...” (IMF report, September 10, 2010).

Mr. Murilo Portugal, (Deputy Managing Director and Acting Chair) said: “The Fund-supported program has continued to perform well, and the Greek authorities are to be commended for their determined implementation of difficult and ambitious macroeconomic policies and structural reforms. Inflation is falling and competitiveness improving. Given pressure points in the public sector and still unfavorable investor sentiment, comprehensive and timely reforms remain essential to secure renewed growth and sustainable public debt dynamics, while protecting vulnerable groups…The overall fiscal adjustment to date has been impressive. Arrears are a matter of concern, but continued budget under-execution should allow the end-year fiscal target to be met. The government’s intention to stick to the original program target for 2011 means that the deficit impact of recent fiscal data revisions will be fully offset” (IMF report, December 17, 2010).

2.4 Policy adjustments

32 | P a g e whether to provide yet more fiscal stimulus to the economies or whether to start curbing government debt and deficit through cuts in public expenditures.

The size of the fiscal consolidation has an immediate effect on the success of the fiscal adjustment strategies and the reduction of each government’s debt. Giavazzi and Pagano (1996), and Giavazzi, Jappelli, and Pagano (2000) find that large consolidations are important for success. They show that sizable improvements in the structural primary balance signal a regime change, and thus have a positive impact on private sector expectations and consumption behavior. When initial debt is high, as in most advanced economies today, a credible and sustained improvement in the primary balance can spur economic growth, which in turn can help achieve faster debt reduction (IMF, 2009).

The composition of the adjustment is also relevant. Alesina and Perotti (1995, 1996); McDermott and Wescott (1996); Alesina, Perotti, and Tavares (1998); Alesina, Ardagna, Perotti, and Schiantarelli (1999); and Alesina and Ardagna (2009) show that expenditure cuts increase the likelihood of reducing public debt, in particular when these cuts are concentrated on public transfers (e.g., pensions, subsidies and other entitlements) and government wages. They also find that the composition of fiscal adjustment is more important than its size in reducing the stock of public debt and generating expansionary effects on output. In these studies, spending cuts are found to be more likely than tax increases to stimulate output growth during the fiscal adjustment period. Higher interest rates, reflecting tighter monetary policy rates, are expected to have an opposite effect by increasing debt service cost and affecting growth and investment negatively.

33 | P a g e hampers growth and would boost the credibility of fiscal consolidation contributing to tighter credit risk spreads.

In Appendix A are summarized the concepts referred in this chapter, in particular the Keynesian economies, the IMF policies and the policy mix implementations. These concepts were used for the questionnaire which is presented in Appendix B.

In this chapter many issues were brought for discussion. Starting with Keynesian economics, as Professor Stournaras has argued as well as many other economists, it is time to reconsider the aspects of this theory. This reconsideration will be done concerning modifications of the theory according to the present circumstances. Implementing the theory of Keynes as it was stated 75 years ago, will not bring solutions but rather cause more problems. Government control to the financial markets that will probably bring more transparency to the economic transactions will help to avoid such an economic crisis like the recent one. Of course economic recessions are part of the economic cycle and it is not possible to eliminate them completely, but with the suggested government control it is possible to decrease the degree of a future economic crisis. Due to the globalization of today, an international institution could exercise control on the financial markets.

An institution that could play such a role is the International Monetary Fund. IMF helps countries all over the world to overcome their financial problems by providing them loans, on the one hand, and by suggesting them fiscal, financial or structural reforms that each government should implement in order to become healthier on the other. In the above section, there were described many situations where the Fund has lend money to many countries and the outcomes of this help. Extensive attention was given to the case of Greece. The Greek government faces many economic problems and therefore has asked for help from the IMF. The IMF from its side suggested some reforms that the Greek government should implement in order to overcome the crisis. These policies are described as austerity and force government to cut his expenses and raise taxes. Finally, the last section of this chapter refers to a policy mix that countries could implement in order to avoid further problems or overcome the existing ones. High government debt forced the countries to implement austerity measures. The debate about the appropriate fiscal policy measures is whether to provide yet more fiscal stimulus to the economies or whether to start decreasing government debt and deficit through cuts in public expenditures.

34 | P a g e Monetary Fund as an institution and the plan the Fund designed for Greece. Finally, since other EU member countries other than Greece face economical problems, it was considered necessary to ask where the European Union stands in these situations. Therefore, the questionnaire consists of questions that refer to policy implementations that the countries should proceed in after an economic recession and the role EU could play in these implementations.

Chapter 3 Methodology

The methodology approach used for this research is based on the intention to go beyond the mass media and governments’ reactions and to analyze the aspects related to the International Monetary Fund plan and the reforms implemented on Greece, through the development of a questionnaire. The topic is really fresh and therefore it was assumed that the best way to develop the research would be with a questionnaire (Appendix B) directed to those people who are supposed to have sufficient knowledge of the topic related to their studies and professional experience. Therefore, the questionnaire was distributed to professors, managers of banks and public authorities as well as students of economic studies, Greek and foreigners, men and women.

The method of research with questionnaires has advantages and disadvantages. Beginning with the advantages, there is a large amount of information on the one hand, but without being too much on the other. The responses are gathered in a standardized way, so questionnaires are pretty objective. Furthermore, questionnaires are familiar to most people and they also reduce time pressure. The time lag between the event and the completion of the questionnaire is almost zero and therefore the results have a bigger credibility, compared for example with the statistical data. Finally, it is important that the researcher's own opinions will not influence the respondent to answer questions in a certain way. Usually many similar opinions lead to a reliable result, which every researcher needs for each study. On the other hand, there are also disadvantages in questionnaires. Namely, questionnaires do not have the ability to explain any points in the questions that participants might misinterpret. Furthermore, respondents may answer superficially especially if the questionnaire takes a long time to complete or if the respondents are not well aware of the answer and they just want to finish it. Finally, there is always the possibility that the respondents will give an answer in order to promote a particular idea.

35 | P a g e international financial conditions as well. In fact, since one of the most important issues in Greece right now are the fiscal and structural reforms the above respondents are the most appropriate due to their educational, professional or both background to give a picture of Greece tomorrow and probably suggest some other more appropriate reforms according to them and of course express their mind about the existing ones. No study method has only advantages or disadvantages, but for this particular case, it is in the researcher’s mind that the method of the questionnaires is the most appropriate one.

As a result, the questionnaire follows the structure of the theoretical framework and tries to assess the topics mentioned there and develop a relationship between them as to be able to have a structured result and opinion of each respondent in the end of the process. In this research, the independent variables taken into account are the gender (Men and Women), the age (20-39 and 40-60), the educational level (Bachelor/University and Master Degree) and the function (Professionals and Students) of the respondents. On the other hand, the dependent variable will be considered each one of the sixteen questions included in the questionnaire. In particular, the intention was to test this particular topic in order to achieve conclusions that might also suggest further regulations and a clearer definition of the role the International Monetary Fund plays or will play in the future in the country’s financial situation. As stated in the literature, the results of the help the Fund has provided in the past were not the most positive ones and the reforms implemented now in Greece do not differ that much with the ones in the countries, mentioned above. The responses of the questionnaires will probably give a clue for how Greece will be or should be in the future, after all these reforms and how similar situations in other countries can be avoided or prevented in the future.

3.1 Questionnaire Design