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Eurozone Crisis – IMF Intervening as a Consultant, Not as a Bank

In one of these days interviews, IMF Managing Director Christine Lagarde has suggested that the institution it leads kight go out of its biggest tool to intervene into the countries – its money. If in the past IMF used to help much smaller economies from Latin America or Asia, in the latest Eurozone crisis IMF needs to step in for much larger countries. Spain or Italy are no small feat for it – actually the financial aid for this country is (in the worst case scenario) far beyond IMF’s needs.
What does this mean for the involved countries? First of all, the crisis has shown that the European financial bazooka can be too small for such large teorritories. The European Stability Fund though it could contain the crisis by buying up as many of the bonds as possible. Well, it could find out that this might not be enough. Meanwhile, the IMF support could be limited or even close to zero, as the politics play an important role in the continental Europe.
Secondly, IMF might need to do a much better job in consulting the countries during their structural adjustments. Convincing, not money, should be their main weapon. And as such, Mrs. Lagarde might find that fighting with the stubborn Spanish guys might not be so easy… It could also mean that IMF is somehow signalling their incapacity to step up its bailing fund for these countries!

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