Airing the IMF's dirty European laundry

[Disir]

Following the International Monetary Fund’s controversial actions in the Asian financial crisis of 1998, when it conditioned liquidity assistance to distressed countries on government belt-tightening, it established an independent evaluation office (IEO) to undertake arm’s-length assessments of its policies and programmes. The office has now issued a comprehensive critique of the IMF’s role in Europe’s post-2008 crisis.

Many of the IEO’s conclusions will be familiar. IMF surveillance, intended to detect economic vulnerabilities and imbalances, was inadequate. While staff sometimes pointed to booming credit, gaping current-account deficits or stagnant productivity, they downplayed the implications.

This reflected a tendency, conscious or not, to think that Europe was different. Its advanced economies did not display the same vulnerabilities as emerging markets. Strong institutions such as the European commission and the European Central Bank (ECB) had superior management skills. Monetary union, for some less-than-fully articulated reason, changed the rules of the game.

Such self-serving claims were in the interest of European officials, but why was the IMF prepared to accept them? One answer is that European governments are large shareholders in the Fund. Another is that the IMF is a predominantly European institution, with a European managing director, a heavily European staff and a European culture.

Still on familiar ground, the report goes on to criticise the IMF for acquiescing to European resistance to debt restructuring by Greece in 2010; and for setting ambitious targets for fiscal consolidation – necessary if debt restructuring was to be avoided – but underestimating austerity’s damaging economic effects.

More interestingly, the report then asks how the IMF should coordinate its operations with regional bodies such as the European commission and the ECB, the other members of the so-called troika of Greece’s official creditors. The report rejects claims that the IMF was effectively a junior member of the troika, insisting that all decisions were made by consensus.
Airing the IMF's dirty European laundry

Wash. Rinse. Repeat.

 

[Dekster]

trying to force growth instead of containing losses is a mistake that the US will eventually have to own up to as well.

 

[Andylusion]

First, I get a little tired of the claims that somehow the IMF is to blame, while at the same time trying to claim the IMF should have known these countries were acting up. If the countries were acting up, low productivity combined with account deficits, and so... does that not automatically imply that the countries themselves are to blame, rather than the IMF?

And even if the IMF did discover and alert everyone about these problems, so what? They can't actually do anything.

The only thing the IMF can do is offer bailout money with strings attached to push for changing the problems they see.

The exact thing that everyone hates the IMF for doing.

Greece is a perfect example. The leading picture, is in Greece saying "IMF get out!"

But without the IMF, the Greek catastrophe would have been far worse, because for almost an entire year, the whole Greek government only operated on the funds from the IMF. Funds they couldn't get from anywhere else, and without such funds, the entire government would have by all practical standards, ceased to exist.

And while it's easy to point fingers and claim the IMF should have done more research and sounded the warnings, what good would it have done?

People had been warning about the left-wing Greek government blowing money, all the way back in the 1990s. The warnings had been given over and over, that their pension system was not sustainable, and their budget deficits were dangerously high.

No one did anything. All the warnings went ignored

The same is true in the US. We had warnings that there was a property bubble, and those warnings went ignored until we had a massive crash.

Similarly, we have had warnings for a decade now, that Social Security is not sustainable, and Medicare is a train wreck waiting to happen.

Yet here we are claiming somehow the IMF is to blame for not seeing problems before they happen? When will western nations stop trying to shift blame to everyone, except the foolish public and politicians that put in place these bad policies?

No doubt if the entire United States were to default, somehow they would try and pin the blame on the IMF. How about we stop being so childish, and grow up. Stop with all the blame shifting, and re-learn a concept of "national responsibility". Maybe the reasons Greece is, where it is, is because of the policies and government programs Greece implemented.