The IMF has admitted it completely underestimated the effects of austerity on the Irish economy and believed the tax increases and spending cuts would not have cost so many jobs.
The revelation comes in three pages of academic analysis tucked away in the body’s annual report being released in Tokyo today where the IMF and the World Bank are holding their annual congress.
The report says the IMF believed that for every €100 of austerity through higher taxes and spending cuts, the effect on economic growth and unemployment would be the equivalent of €50.
But in reality the effect has been between double and three times that — stripping the economy of €90 to €150 for every €100 taken out in budgets agreed with the troika.
Tom McDonnell of the independent think-tank Tasc said the report called into question the Government’s budgetary strategy.
"It suggests recent budgets have actually been more damaging to the Irish economy than the Government was estimating. It would also help explain why growth has been lower over the last few years than the Government had expected — and why the vaunted ‘return to growth’ has failed to substantively materialise."
The findings show Ireland had the second highest austerity measures in the developed world in 2010 — Greece had the highest.