Monday, July 23, 2012

Dissension In The Ranks

Reuters gets the scoop (excerpt, H/T BBC):

IMF economist accuses Fund of suppressing information

WASHINGTON, July 20 (Reuters) - A veteran economist at the International Monetary Fund has accused the global lender of suppressing information on difficulties in dealing with the global financial meltdown and euro zone crisis.

In a resignation letter to the IMF's board and senior staff, dated June 18, Peter Doyle said the IMF's failures in issuing timely warnings for both the 2007-2009 global financial crisis and the euro zone crisis were a "failing in the first order" and "are, if anything, becoming more deeply entrenched."

His letter, a copy of which was seen by Reuters, has brought to light simmering tensions within the IMF over the Fund's credibility, which many worry is threatened by its role in the euro zone crisis.

IMF insiders, who asked not to be identified, told Reuters the concerns are that the Fund has over-stretched by lending to Europe without exercising the same level of independence it would normally apply in bailouts to emerging economies.

Doyle, a division chief for Sweden, Denmark and Israel in the IMF's European Department when he resigned, also accused the Fund's leadership of being "tainted" by a selection process which always ensures that a European is at the helm.

Sour grapes or legitimate grievances? Whichever the case, the concerns raised are real enough – given that membership and clientele are increasingly weighted towards emerging markets, it makes little sense for Europeans to have a monopoly over leadership of the IMF. Accusations that the IMF is more lenient in its involvement in European bailouts – the PIGS are high profile, but there have been others – don’t do its credibility much good either.

While these issues have been recognised and change is on the way, it may not be coming fast enough. The laser focus of the IMF on Europe could also blind it to developments happening elsewhere. Physician, heal thyself.

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