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Monday, August 29, 2016

The IMF's Ground-Breaking Role In Understanding The Euro-Area Crisis!

The IMF has taken a beating of late, particularly with regard to the Greek financial crisis. A Senior Fellow at the Bruegel Institute, Nicolas Véron, now comes to the support of the IMF with his article "The IMF's role in the euro-area crisis: financial sector aspects". Here is an excerpt:

"The International Monetary Fund (IMF) played a ground-breaking role in understanding the financial-sector dynamics of the euro-area crisis. It was the first public authority, and one of the first more generally, to acknowledge the role of the bank-sovereign vicious circle as the central driver of contagion in the euro area. It was the first public authority to articulate a clear vision of banking union as an essential policy response, building on its longstanding and pioneering support of banking policy integration in the European Union."

Was the IMF really the first public authority to highlight the risky dynamics of the Eurozone? Well, not quite. The European Commission itself, with the Delors Report of 1989, had pointed out the structural insufficiencies of the Eurozone. Karl-Otto Pöhl, a former Bundesbank President and member of the Delors commission, later commented: "When the report was formulated, I did not think that a monetary union would become reality in the foreseeable future. I thought perhaps sometime in the next hundred years. I thought it was improbable that other European countries would simply accept the model of the Bundesbank".

Well, Pöhl was wrong. Very expensively wrong!

3 comments:

  1. It's depressing to remain stuck in the mire simply because the Eurozone refuses to move on.

    Move on! Either reform to Eurozone so that it resembles a proper monetary union, or break it up. No middle ground, no more temporary solutions, no more band-aids. Enough is enough. Either fix this, or dismantle it.

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    Replies
    1. They have no idea how to reform, neither do they understand how we got to where we are languishing today. Depressing to be in the hands of such idiots.

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    2. This is what happens when politicians are allowed to make important decisions about the economy.The IMF should never have allowed itself to get caught up in this nonsense of the eurozone: they have a bad enough reputation as it is, without adding to it.

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