IMF on the hotspot

Implications the Fund has fuelled the crisis are an exaggeration, Romanian economists think. The financial institution clearly denies allegations.

Czech central bank Vice-Governor Mojmir Hampl recently said the International Monetary Fund (IMF) fuelled the economic crisis in emerging Europe last year in order to create the sort of situation that would make states in the region seek its assistance. His position has generated endless controversy. According to Hotnews.ro, Romanian economy professor Bogdan Glavan says the IMF is not interested to uproot the causes of economic shortcomings because that would make it redundant.

"Balancing a budget by increasing taxes has a negative effect on the economy. The IMF is fundamentally acting as an endorser for Western banks (lender of last resort) in relations with emerging markets," he explained. On the other hand, PM Boc's economic adviser Andreea Paul Vass says the Czech vice-governor had exaggerated. "First of all, the IMF arranged meetings of main lending banks in Eastern Europe at least two times, asking them not to lower exposures in Eastern states. In general terms, the banks have kept their promise. We have not perceived the allegations levelled against the IMF," Vass said. She added the IMF had not intervened in the US, Germany or the UK - countries that suffered the biggest loss from trading toxic financial assets.

The IMF has acted in countries that have taken up too much debt and needed additional support in securing external equilibrium. Romania is such an example, with a short-term foreign debt of almost EUR 20 bln created by the privately-owned sector, at the end of 2008. As a matter of fact, Romanian central bank Governor Mugur Isarescu has recently said in a presentation delivered in Barcelona that, if Romania had not received the external loan from the IMF and the EU, it would have faced an exchange rate crisis.

In the meanwhile, the Deputy Director of the IMF International Relations Department, Gerry Rice, says in a letter to 'Der Standard' that Hampl's claims were 'in contradiction with the actual situation, while also defying common sense and discernment of the international community'. Czech central bank Governor Zdenek Tuma noted that Hampl's remarks were 'personal views' not representing the official position of the bank.

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