IMF trapped in EU Sovereignty conundrum!
The IMF exists to aid sovereign nations in economic difficulties. EuroGroup member states do not properly meet such criteria, as a consequence the IMF has put itself between a rock and a hard place.
Most IMF bailouts involve a currency devaluation by the distressed nation. Such is not possible with the EuroGroup ex-nations. Ultimately a devaluation of the euro could be achieved by steady degradations of the credit ratings of all the EuroGroup member states, logically terminating in Germany, a process now clearly and steadily underway. Yet Germany has no legal obligation to participate, indeed any such action has effectively already been declared as unconstitutional. So how has the IMF fulfilled its own obligations to its Board Members and fund providers? In a report in the Irish Times this morning, linked here, we have the answer:
In the letters, it is conceded the Government stands ready to implement further austerity measures beyond the €15 billion in the four-year plan, if the stringent quarterly targets set out by the EU-IMF in its three-year programme are not met.
The letter to IMF managing director Dominique Strauss-Kahn, states: “We stand ready to take any corrective actions that may become appropriate for this purpose as circumstances change. As is standard under fund-supported programmes, we will consult with the fund on the adoption of such actions.”
It appears from this that devaluation is not an option that has been ruled out by the IMF in so far as their loan to Ireland is concerned. (Note also the sting in the tail of the linked newspaper report which announces The Government has withheld from publication a side letter agreed with the EU and IMF outlining confidential measures for the banks and tax changes to be included in Tuesday’s budget.
Most IMF bailouts involve a currency devaluation by the distressed nation. Such is not possible with the EuroGroup ex-nations. Ultimately a devaluation of the euro could be achieved by steady degradations of the credit ratings of all the EuroGroup member states, logically terminating in Germany, a process now clearly and steadily underway. Yet Germany has no legal obligation to participate, indeed any such action has effectively already been declared as unconstitutional. So how has the IMF fulfilled its own obligations to its Board Members and fund providers? In a report in the Irish Times this morning, linked here, we have the answer:
In the letters, it is conceded the Government stands ready to implement further austerity measures beyond the €15 billion in the four-year plan, if the stringent quarterly targets set out by the EU-IMF in its three-year programme are not met.
The letter to IMF managing director Dominique Strauss-Kahn, states: “We stand ready to take any corrective actions that may become appropriate for this purpose as circumstances change. As is standard under fund-supported programmes, we will consult with the fund on the adoption of such actions.”
It appears from this that devaluation is not an option that has been ruled out by the IMF in so far as their loan to Ireland is concerned. (Note also the sting in the tail of the linked newspaper report which announces The Government has withheld from publication a side letter agreed with the EU and IMF outlining confidential measures for the banks and tax changes to be included in Tuesday’s budget.
posted by Martin at 10:31 AM
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