Fresh from the calamity of the Cypriot bail-out, a fiasco that he personally oversaw, he was at it again at the International Monetary Fund’s spring meeting in Washington last week.
He was having none of the ear-bashing he had evidently received from some over the severity of fiscal austerity in Europe. In fact, he was pleased to announce that thanks to hard decisions, eurozone budget deficits had been halved since 2011 from 6pc to 3pc.
What’s more, fiscal consolidation in the eurozone this year is forecast to be just 0.75pc of GDP, against 1.5pc last year. This was smaller than the 1.25pc consolidation projected for the United States, so he was taking no lessons from anyone about oppressive levels of austerity.
The medicine was working and the crisis was easing. It took me a while to work out what Mr Rehn was really trying to say, but then it hit me like a blinding flash. The European commissioner was talking about the eurozone as if it was a single country.
He had aggregated the budget deficits of all 17 member states into a single figure, and because Germany and some others are already running something close to balanced budgets, the overall picture does indeed look relatively benign.
Regrettably, there are still enormous differences within the whole, and this is rather the nature of the problem.Looked at as a single entity, the eurozone is a remarkably well balanced economy, with tolerable levels of government indebtedness and a healthy current account.
Within it, there are gross imbalances that are tearing not just the eurozone, but the entire world economy, apart.
Neither Mr Rehn, nor the grand mufti of the IMF, seem prepared to face up to this unpalatable truth. In its latest World Economic Outlook, the IMF warns that one of the big dangers facing the global economy is that of “adjustment fatigue”.
By this is meant that as the immediate financial crisis abates, the pressure on policymakers to confront their problems and take painful decisions eases.
In fact, this is already happening, and nowhere is it more evident than in the eurozone, where denial, verging in Mr Rehn’s case on the delusional, remains the order of the day.
The IMF is part of this collective failure. Rather than galvanising political leaders into properly addressing the underlying problem – which right now is the failing euro and the pall it is casting over the world economy – the fund allows itself to be subsumed by political grandstanding and point scoring.
Rather than focusing on the main issue, the fund concerns itself with trivia such as this week’s irrelevant row over whether the UK is consolidating too fast.
The idea this is going to make a blind bit of difference as long as fundamental problems with the euro are left unresolved is bizarre.
Why is the IMF urging fiscal expansionism on the UK, but not France, which because it has a smaller deficit than the UK is arguably better placed to shoulder such a strategy?
There’s a glaring inconsistency in the IMF’s approach that inevitably leads to the suspicion of political meddling.
Is Christine Lagarde, the IMF’s managing director, using the fund for domestic political purposes?
Certainly it furthers her French presidential ambitions to keep the stiletto as hard down on François Hollande as she can.
As for the British strictures, were these merely part of a wider game that will allow the IMF to provide the same advice to the US, thereby giving ammunition to the Obama administration in its budgetary battles with Republicans?
Whatever the answer, while the IMF fiddles, the world economy goes to hell in a handcart. I never thought I’d say this, but perhaps Britain should have backed Gordon Brown for the job of IMF managing director after all.
Whatever his failings, he surely wouldn’t have tolerated these risible levels of complacency. Crisis? What crisis?
The British Chancellor, George Osborne, always likes to take in a visit to one of the battlegrounds of the American civil war, of which he is a keen student, when attending IMF meetings.
This year it’s the appropriately named Chancellorsville, the scene of a famous victory by the Confederate general, Robert Lee.
With nothing achieved at the IMF spring meeting, it must have been a welcome distraction.
telegraph.co.uk
He was having none of the ear-bashing he had evidently received from some over the severity of fiscal austerity in Europe. In fact, he was pleased to announce that thanks to hard decisions, eurozone budget deficits had been halved since 2011 from 6pc to 3pc.
What’s more, fiscal consolidation in the eurozone this year is forecast to be just 0.75pc of GDP, against 1.5pc last year. This was smaller than the 1.25pc consolidation projected for the United States, so he was taking no lessons from anyone about oppressive levels of austerity.
The medicine was working and the crisis was easing. It took me a while to work out what Mr Rehn was really trying to say, but then it hit me like a blinding flash. The European commissioner was talking about the eurozone as if it was a single country.
He had aggregated the budget deficits of all 17 member states into a single figure, and because Germany and some others are already running something close to balanced budgets, the overall picture does indeed look relatively benign.
Regrettably, there are still enormous differences within the whole, and this is rather the nature of the problem.Looked at as a single entity, the eurozone is a remarkably well balanced economy, with tolerable levels of government indebtedness and a healthy current account.
Within it, there are gross imbalances that are tearing not just the eurozone, but the entire world economy, apart.
Neither Mr Rehn, nor the grand mufti of the IMF, seem prepared to face up to this unpalatable truth. In its latest World Economic Outlook, the IMF warns that one of the big dangers facing the global economy is that of “adjustment fatigue”.
By this is meant that as the immediate financial crisis abates, the pressure on policymakers to confront their problems and take painful decisions eases.
In fact, this is already happening, and nowhere is it more evident than in the eurozone, where denial, verging in Mr Rehn’s case on the delusional, remains the order of the day.
The IMF is part of this collective failure. Rather than galvanising political leaders into properly addressing the underlying problem – which right now is the failing euro and the pall it is casting over the world economy – the fund allows itself to be subsumed by political grandstanding and point scoring.
Rather than focusing on the main issue, the fund concerns itself with trivia such as this week’s irrelevant row over whether the UK is consolidating too fast.
The idea this is going to make a blind bit of difference as long as fundamental problems with the euro are left unresolved is bizarre.
Why is the IMF urging fiscal expansionism on the UK, but not France, which because it has a smaller deficit than the UK is arguably better placed to shoulder such a strategy?
There’s a glaring inconsistency in the IMF’s approach that inevitably leads to the suspicion of political meddling.
Is Christine Lagarde, the IMF’s managing director, using the fund for domestic political purposes?
Certainly it furthers her French presidential ambitions to keep the stiletto as hard down on François Hollande as she can.
As for the British strictures, were these merely part of a wider game that will allow the IMF to provide the same advice to the US, thereby giving ammunition to the Obama administration in its budgetary battles with Republicans?
Whatever the answer, while the IMF fiddles, the world economy goes to hell in a handcart. I never thought I’d say this, but perhaps Britain should have backed Gordon Brown for the job of IMF managing director after all.
Whatever his failings, he surely wouldn’t have tolerated these risible levels of complacency. Crisis? What crisis?
The British Chancellor, George Osborne, always likes to take in a visit to one of the battlegrounds of the American civil war, of which he is a keen student, when attending IMF meetings.
This year it’s the appropriately named Chancellorsville, the scene of a famous victory by the Confederate general, Robert Lee.
With nothing achieved at the IMF spring meeting, it must have been a welcome distraction.
telegraph.co.uk
No comments:
Post a Comment