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The IMF Still Misunderstands the Euro Crisis

In July, the IMF’s Independent Evaluation Office released a major report on how the Fund handled the euro crisis after 2010. The report is critical of Fund behavior; but, as with previous IMF self-evaluations, it misses key issues – and thus reinforces assumptions that need to be challenged.

WASHINGTON, DC – In July, the International Monetary Fund’s Independent Evaluation Office released a major report on how the Fund handled the euro crisis after 2010. The IEO report is critical of Fund behavior; but, as with previous IMF self-evaluations, it misses many substantive issues.

Specifically, the IEO argues that the Fund was captive to European interests – hardly surprising, given that Europeans constitute one-third of the Fund’s executive board. Moreover, the Fund was mistaken in assuming that “Europe is different,” and that “sudden stops could not happen within the euro area.”

In a financial crisis, authorities must act fast to address the problems that caused it and restore confidence. The United States government did just that in the fall of 2008; European leaders, meanwhile, dithered – a point the IEO neglects to mention.

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