Can IMF resist pressure to bend its own rules?
Letter to the editor

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Sir, Your editorial “eurozone should relieve the IMF” (August 2) is right on the mark in suggesting that, on the basis of its recent Greek experience, the International Monetary Fund should not be called upon to provide future large-scale lending programmes in Europe. This would especially appear to be the case now that Europe has an adequately funded European Stability Mechanism in place and now that the European Central Bank has committed itself through its Outright Monetary Transaction programme to buy unlimited amounts of short-dated sovereign bonds of the European peripheral countries subject to those countries signing up to economic adjustment programmes.

The fact that Europe now does have adequate financing to fund any future European bailout programme should allow the IMF to limit itself in Europe to its traditional role of being a catalytic lender and the provider of a seal of approval for sound macroeconomic policy management.

The question remains, however, whether, with smaller European lending programmes, the IMF will be any more successful than it has been to date in resisting European government pressure to bend the IMF’s own rules in those lending programmes. One would have thought that if the IMF could not resist such pressure when it had an unusually large amount of its own money at risk, it will be even less successful in resisting that pressure when it has relatively little of its own money at stake.

Desmond Lachman, American Enterprise Institute, Washington, DC, US

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