Richard North, 19/07/2012  

IMF 840-yud.jpg

The IMF has joined the eurosceptic camp, according to Ambrose in his latest article. His evidence is the IMF's latest report on the eurozone, an astonishing document, says Ambrose. When the full history of this episode is written, this "Article IV Consultation" will be cited as a key exhibit.

"The euro area crisis has reached a new and critical stage", it opens. "Despite major policy actions, financial markets in parts of the region remain under acute stress, raising questions about the viability of the monetary union itself". 

The adverse links between sovereigns, banks, and the real economy are stronger than ever. Financial markets are increasingly fragmenting along national borders, and "the eurozone is unworkable in its current form, a half-baked currency union that spreads contagion like wildfire without the backup machinery to contain the damage".

The view is that the euro area "is in an uncomfortable and unsustainable halfway point. While it is sufficiently integrated to allow escalating problems in one country to spill over to others, it lacks the economic flexibility or policy tools to deal with these spillovers".

With further analysis, the IMF report concludes that Europe's leaders have still failed to grasp the nettle: "The deepening of the crisis suggests that its root causes remain unaddressed", and thus:
The crisis calls for a much stronger collective effort now to demonstrate policymakers' unequivocal commitment to sustain EMU. Only a convincing and concerted move toward a more complete EMU could arrest the decline in confidence engulfing the region.
Entertaining though this is, Ambrose, it seems to me, is being slightly premature in labelling the IMF "eurosceptic". He sees the report as "a pre-emptive move to pin responsibility for the coming deluge exactly where it belongs". But, with the IMF calling for "a convincing and concerted move toward a more complete EMU", this is more like the institution racking up the pressure for an early treaty which delivers fiscal union.

With a Kermit at is head, this tranzie organisation is looking after its tranzie mates in the commission. A treaty giving them more power is on its way. Alles ist gut.

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