The IMF’s Uneasy Excursion into the Euro Zone

Much of the evolutionary history of the International Monetary Fund reflects its responses to unanticipated events. The crisis in the Eurozone at the end of the 2000s was largely unexpected. For many years prior to the crisis, the IMF’s clientele had been made up of low income and emerging economies and it was generally assumed that the future pattern of IMF lending would see some of them graduating from the Fund, rather than the Fund once again lending to ‘advanced’ economies. Programs in Greece, Ireland, Portugal and Cyprus confronted the Fund with a range of unfamiliar problems. These cover the IMF as a crisis averter, crisis lender and crisis manager. In particular the conventional design of IMF adjustment programs is not feasible in countries that belong to a monetary union. In this regard the ‘major overhaul’ of conditionality made in the aftermath of the global economic crisis may have been unhelpful. While various reforms could enhance the Fund’s ability to help Eurozone countries in the future, perhaps the main lesson that emerges from this interlude is that it is better for the IMF’s assistance not to be needed in Eurozone countries.