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.
He said the IMF had been “playing catch-up and reactive roles in the last-ditch efforts to save” the euro zone from the “brink.” The IMF is part of a “troika” of international lenders, including the European Commission and European Central Bank, involved in rescue loans to Greece, Ireland and Portugal.
Doyle, who has worked for the IMF for 20 years, said the appointments of the Fund’s heads over the past decade “have all-too-evidently been disastrous.”
“Even the current incumbent is tainted, as neither her gender, integrity or élan can make up for the fundamental illegitimacy of the selection process,” Doyle said of Christine Lagarde’s appointment last year as first female head of the IMF.
To be fair, the IMF has acknowledged some of the failures cited by Doyle in reports in 2009 and in 2011 that honed in on mistakes in spotting the roots of the global financial crisis and for not going far enough in warnings to policymakers of the impending crisis.
“Peter’s remarks are well documented in the public record, including reports issued by the Independent Evaluation Office, via the triennial review of surveillance, and in many statements by the managing director, including on the findings in these various reports,” said IMF spokesman William Murray.
“We have no evidence his views were suppressed, nor (that) any views were suppressed,” he added.
The last three heads of the IMF have all resigned before the end of their terms. Horst Koehler stepped down suddenly in 2004 to run for president of Germany. His successor and former Spanish finance minister Rodrigo Rato unexpectedly resigned halfway through his term in 2007 to return to Spain.
Dominique Strauss-Kahn, the former French finance minister, quit last year after he was arrested in May 2011 for alleged criminal sexual assault and attempted rape of a hotel maid, which he denied. Charges have since been dropped.
Strauss-Kahn’s push for an IMF role in the euro zone, including approval of big bailouts for Greece and Ireland, and more flexible IMF conditions, caused tensions with some members of the IMF board.
Despite their concerns, many acknowledged that the IMF’s involvement was necessary to ensure stability of the global financial system.
Lagarde’s appointment just over a year ago followed a hard-fought battle between Europe and emerging economies fed up with the tradition of the head of the IMF always being a European, while the top job at the World Bank has gone to Americans.
“There is certainly a concern that the MD is more a politician than an economist and that she can be swayed by those close to her,” one insider said. “But she is certainly seen as a powerful messenger for the Fund’s position.”
Reuters
