Macroscope | IMF might have lost its policy clout over Greece

Until not so long ago, governments and markets were in thrall to the International Monetary Fund. The IMF is one of the world's most powerful institutions and its word on global stabilisation efforts has generally been seen as sacrosanct and final. When economies hit hard times and sought the IMF's help, it was universally accepted for countries to take its tough monetary medicine without question.

For Greece, it has been much too bitter a pill to swallow. As the Greek crisis has come to a head, the country's radical left government has stared the IMF in the eye - and the IMF blinked first. It looks like it's time for the IMF to start nurturing rather than hectoring countries in desperate need of bailout aid. A new era of better conciliation and less confrontation is required.

The global financial crisis might have given the IMF new impetus as the world's corrector of imbalances, but the hiccup over its handling of the Greek crisis has dented the organisation's credibility. In an increasingly bilateral world, there is a risk the agency's policies becoming too outdated.

The IMF's supporters would claim the organisation has accomplished great miracles since its inception in 1945, sparing many countries from deeper chaos with its support packages and bailout aid.

But the IMF has its detractors. Its harshest critics have described it as a global "loan shark" extracting enormous leverage over economies forced to turn to it cap in hand as the lender of last resort. Governments have often complained the IMF's harsh conditions have placed major shackles on economies struggling back to recovery.

It is no surprise Greece has felt its back against the wall in the past five years, hemmed in by the so-called "troika" - the IMF, the European Commission and the European Central Bank. Complaints about enforced austerity have been at the root of Greek grievances. A quarter of the workforce without work, hit hard by depression, the banking system on the brink of collapse and a threatened euro exit looming were not expected outcomes when Greece turned to the troika for help.

By its own admission, the IMF could have performed a lot better throughout the crisis. Only now, it admits Greece needs up to €60 billion (HK$516.8 billion) of extra funds over the next three years, with large-scale debt relief in order to create a "breathing space" to stabilise the economy.