“What’s a firefighter to do when there aren’t any fires?” asks The Economist. “The IMF spent 1994-2002 dashing from one financial conflagration to the next. But the sirens have been silent for some time.” Nowadays, few countries need the IMF to bail them out, so it is creating a new role for itself – and a way to justify its $900m-a-year running costs.
Last weekend, the world’s finance ministers unexpectedly agreed to the Fund’s proposal that it should change from an emergency lender into a global economic umpire. It will now aim to close trade gaps and prevent financial crises. “The changes… are the most fundamental since the early 1970s, when the IMF’s role changed dramatically as the system of fixed currencies set up at the post-war Bretton Woods conference collapsed,” says Edmund Conway in The Daily Telegraph.
And though some thought the changes were just a return to the IMF’s founding principles, news of the agreement was lauded by journalists. The jargon-filled agreement may not sound like a breakthrough, say Chris Giles and Krishna Guha in the FT, yet even the most sceptical finance ministers hailed it as a “great success”. And “crucially” there is finally a will to do something about the “biggest threat” to the world economy: trade gaps.
But there was some scepticism about how well these vaunting ambitions would be realised. “What is the IMF really prepared to say? What pressure is it prepared to put on countries that are not delivering? We don’t know,” says Morris Goldstein, a former IMF deputy director, quoted in the FT. “This is no more than a beginning,” agrees the FT. It must make sure it doesn’t become “just another talking shop”.
Big questions marks remain, says Gary Duncan in The Times. As the IMF can only try to “knock heads together”, it is hard to be confident that countries will not “continue to turn a deaf ear to unpalatable advice”. And major changes to the Fund’s governance structure failed to be passed. The voting system is still skewed in favour of Europe and the US and Europe will still choose who heads it. “This essential reform will be less easy to push through,” warns the FT.
Published in Economics
| More articles
by
Annunziata Rees-Mogg
Related articles
-
By Bill Bonner, Jun 19, 2008
-
By Bill Bonner, Jun 16, 2008
-
Jun 16, 2008
FREE - MoneyWeek's daily investment email
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.
