The IMF’s Independent Evaluation Office (IEO) issued a report today on the IMF’s response to the financial and economic crisis and declared the Fund’s overall performance to be “mixed”. It found that while the IMF had appropriately called for fiscal stimulus to counter the effects of the financial crisis in 2008, two years later its “call for fiscal consolidation proved to be premature”.
In numerous statements and communications to the IMF over the past four years, the ITUC and its Global Unions partners made exactly that point. For example, Global Unions began their statement to the October 2010 annual meetings of the IMF and World Bank as follows:
“Global Unions are deeply concerned that the recent shift by the international financial institutions away from support for stimulus policies toward advocacy of fiscal consolidation will endanger the fragile recovery and prolong current high jobless rates for years to come. Signs that economic growth is slowing in some regions of the world barely months after the recovery began raise the probability of a double-dip recession to which the policy shift will have contributed…. This statement calls on the IFIs to reject austerity programmes and to support job-focused stimulus measures and investments in quality public services to assist in the recovery.” (http://www.ituc-csi.org/statement-by-global-unions-to-the)
The IMF’s policy shift in favour of fiscal consolidation or austerity was developed in partnership with the European Central Bank and the European Commission in the so-called Troika, and endorsed by a G20 Summit that took place in Toronto in June 2010. Deficit-reduction measures were enforced through IMF loan conditions in several countries that were in the midst of recession.
The policies were relaxed slightly after 2012 when the IMF realized that the premature push for austerity had contributed to a renewed economic slowdown in Europe, but the IEO report states that the IMF should have foreseen these consequences. The report also raises questions about the Fund’s “role, accountabilities, and independence“ in its partnership with the European Troika and its relationship with the G20.
Two excerpts from the IEO report are copied below. The full 53-page report is available at:
A good Reuters piece posted today about the report is here:
“IMF gave richer countries wrong austerity advice after crisis: watchdog”
ITUC/Global Unions – Washington Office
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Excerpts from “IMF RESPONSE TO THE FINANCIAL AND ECONOMIC CRISIS: AN IEO ASSESSMENT”, 4 November 2014
“The IMF’s overall record in post-crisis surveillance was mixed. Its calls for global fiscal stimulus in 2008–09 were timely and influential. However, by 2010 it had endorsed a shift to consolidation in some of the largest advanced economies, coupled with monetary expansion to stimulate demand if needed to maintain the recovery. The call for fiscal consolidation proved to be premature, as the recovery turned out to be modest in most advanced economies and short-lived in many European countries. The recommended policy mix was not appropriate, as monetary expansion is relatively ineffective in boosting private demand following a financial crisis…. Also, the IMF did not sufficiently tailor its advice to countries based on their individual circumstances and access to financing when recommending either expansion or consolidation.” (p 33)
“Over the past few years, the IMF has coordinated and partnered with other organizations in critical initiatives such as the G20 MAP, the newly-created FSB, and the Troika. These initiatives proved largely effective in addressing aspects of the crisis and also helped to enhance the traction of IMF analysis and advice. In some cases, however, they raised questions about the IMF’s role, accountabilities, and independence, as well as about how to ensure uniform treatment of all IMF members.” (p 35-36)
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