G20 finance ministers need to stand in the way of European manipulation of the International Monetary Fund when they meet in Mexico City this weekend, PIMCO chief executive Mohamed El-Erian writes in a column published today in the Financial Times.
A staunch critic of Europe’s attempts to get around its internal problems by relying on IMF funding, he argues that non-European economies need to stand up for the IMF’s professed “uniformity of treatment,” particularly given the harsh rules the organisations have imposed on emerging market countries in Asia and Latin America in the past.
A few choice snippets:
It should come as no surprise that over the last couple of years Europe has pressed the IMF very hard to make exception after exception – and it has succeeded. This has resulted in a number of firsts by an organisation that prided itself on the “uniformity of treatment” for member countries.
This is an internal issue that the IMF cannot, and should not be expected to, solve. It is up to the eurozone to decide whether to go forward in its current configuration towards a fiscal union or whether to first slim down to a more coherent and stable configuration. This would provide a better basis for a larger European-financed firewall.
As tempting as it is, Europe should not seek to obfuscate this critical decision by using IMF financing to give the appearance of sustaining the unsustainable. It must start making the necessary, albeit very difficult, decisions. Until this happens, the G20 has a global responsibility to protect the IMF from further damage to its credibility and legitimacy.