Explaining IMF design of 2010 Greece loan: bricoleurs relying on fiscal space and nonlinear multiple equilibria processes

Abstract

AbstractThe IMF’s 2010 Troika lending programme with Greece was unprecedented due to the IMF’s controversial internal rule changes, the programme’s pivotal effects on eurozone crisis policies and the effect of austerity concepts on Greece. We aim to explain conclusively why the IMF lent to Greece without restructuring, as previous explanations have crucial gaps. We operationalise Ben Clift’s theory of IMF behaviour in process-tracing, analysing programme-related text sources. Our exercise is novel as Clift does not aim to explain individual programmes, while the theory warrants further testing. According to our causal mechanism, the IMF used two key analytical lenses formed via bricolage, fiscal space and nonlinear multiple equilibria processes (NLMEP), to analyse the programme context and formulate the programme design. While we find our mechanism too narrow to explain the programme design, our results regarding the role of NLMEP and fiscal space within IMF programme-time economic analysis support the importance of financial contagion as a motivator for monetarily significant IMF participation and why the IMF adhered to austerity despite risking debt stabilisation. However, it seems limitedly useful to assume coherent ideational drivers behind the precise programme design: instead, accepting the key role of ad hoc judgement depicts IMF behaviour accurately.