The IMF will disclose that its biggest mistake was not requiring the original creditors (also known as the banks) to absorb losses at the beginning of the debt crisis.
The IMF is going to say that the primary beneficiaries of the mistaken strategy pursued in Greece were the creditor banks.
Who could have guessed that the creditor banks would have been the beneficiary of Greece destroying its social contract?
Regular readers will recall that following the advice of the bankers, global policymakers and financial regulators adopted the Japanese Model under which bank book capital levels and banker bonuses were protected at all costs. Not having the banks take losses at the beginning of the financial crisis was the direct result of this policy.
As predicted by your humble blogger, the result of protecting the banks and banker bonuses was to put the burden of the excess debt on the real economy with the result being a downward spiraling economy and an end to the social contract.
As the IMF is admitting to mistakes in handling Greece, will it also admit that the same fundamentally flawed strategy was used in Ireland, Portugal and Spain to the detriment of these countries' real economies and social contracts?
The authoritative Kathimerini newspaper said the report identified a number of "mistakes" including the failure of creditors to agree to a restructuring of Greece's debt burden earlier – a failure that had had a disastrous effect on its macro-economic assumptions.
"From what we understand the IMF singles out the EU for criticism in its handling of the problem more than anything else," said one well-placed official at the Greek finance ministry.
"But acknowledgement of these mistakes will help us. It has already helped cut some slack and it will help us get what we really need which is a haircut on our debt next year."Please re-read the highlighted text as it is an explicit statement that the problem of excess debt in the financial system did not go away as a result of pursuing the Japanese Model for the last 5 years. There are still losses to be taken.
One of the reasons that the IMF is apologizing is it realizes that it will have to absorb the losses and it gets its funding from taxpayers. Effectively, the IMF oversaw a program that transferred losses from private balance sheets, the banks, to the taxpayers.
Please note that before the IMF engaged in the program it is now apologizing for, individuals, like your humble blogger, were saying that the program would not work and the only beneficiaries would be the banks.
For this reason, a simple apology is not enough.
At a minimum, 100% of the IMF's pension assets should be given to the poor in Greece with recognition by the IMF that giving up its retirement assets and the right to replace them is the least the IMF can do for the pain and suffering it has caused.