IMF

Alan Beattie

Giving emerging markets their rightful place in running the world economy has now been a staple summit platitude for years. Getting everyone to agree how to calibrate hegemony is a bit trickier.

The IMF is struggling with this at the moment, as its shareholder countries remain a long way apart on revising the “quota“, or voting share, given to each nation on the fund’s executive board. (For a sense of the complexity and intractability, think the Schleswig-Holstein Question but with Excel spreadsheets.) Read more

Here are today’s reading nuggets for you:

Alan Beattie

No word left minced in this fairly fierce resignation letter (obtained by CNN) sent by Peter Doyle, who is quitting the European department of the IMF after 20 years at the Fund, attacking particularly its role in the eurozone crisis.

The money quotes:

After twenty years of service, I am ashamed to have had any association with the Fund at all…

This is not solely because of the incompetence that was partly chronicled by the OIA [Office of Internal Audit and Inspection, though he may be referring to this document by a different watchdog body] report into the global crisis and the TSR [Triennial Surveillance Review] report on surveillance ahead of the Euro Area crisis. More so, it is because the substantive difficulties in these crises, as with others, were identified well in advance but were suppressed here…

Further, the proximate factors which produced these failings of IMF surveillance – analytical risk aversion, bilateral priority, and European bias  - are, if anything, becoming more deeply entrenched, notwithstanding  initiatives which purport to address them.

 Read more

Neil Buckley

Hillary Clinton and Latvian foreign minister Edgars Rinkevics on June 28 (Ilmars Znotins/AFP/GettyImages)

Hillary Clinton and Latvian foreign minister Edgars Rinkevics on June 28 (Ilmars Znotins / AFP/ GettyImages)

Visiting Latvia on Thursday, Hillary Clinton praised the Baltic state for taking “very difficult” austerity measures that would ensure a “stable, prosperous future”.

The US secretary of state is not the only high-profile figure praising Latvia’s economic record.

Christine Lagarde, the IMF managing director, dropped in this month and proclaimed its austerity programme an “inspiration” for heavily-indebted eurozone countries.

Latvia and its Baltic neighbours Estonia and Lithuania suffered the world’s steepest economic contractions in 2009 amid swingeing austerity measures. But now they find themselves in the frontline of the debate over austerity versus growth as the best way to tackle the eurozone’s debt problems. Read more

Alan Beattie

10-year Spanish bonds over past month - Bloomberg

Yields on Spanish 10-year bonds over the past month – Bloomberg

The market reaction to the Spanish bailout continues to validate the infallible eurocrisis trading rule of “buy on the summit, sell on the communiqué”. Why so negative, especially for Spanish sovereign debt?

As has been extensively pointed out, the Spanish rescue is a roundabout way to do a bank recapitalisation. Instead of taking direct equity stakes in the banks, the EFSF/ESM has had to lend via FROB, Spain’s bank rescue fund, thus increasing Spain’s sovereign debt load and raising all sorts of tortuously tricky questions about seniority.

So why do it this way? It’s the old story of policy architecture not reflecting the realities of the world economy. Read more

Alan Beattie

Could the IMF help bail out Spain? Tricky one. As goes the EU, so goes the IMF, only more so. Read more

Dr Jan Fidrmuc, Department of Economics and Finance and Centre for Economic Development and Institutions, Brunel University

Anti-austerity protestors take to the streets in central Athens earlier this year. Getty Images

Anti-austerity protestors take to the streets in central Athens earlier this year. Getty Images

Following the rejection of EU imposed austerity measures by the overwhelming majority of Greek voters, eurozone finance ministers have once again come to Brussels to try and save the single currency in what is being described as a ‘crucial 48 hours’.

Two thirds of the Greek electorate voted for parties opposed to the austerity measures required by the European Commission, ECB and IMF as a precondition of a further bailout; despite the outgoing government pledging to adhere to these measures.

Without compromise either by the Greeks accepting austerity measures or the EU offering concessions on the proposed package, another election is inevitable. In this case the bailout package will be suspended, Greece will default on its debt and an exit from the eurozone may follow. None of this will offer much respite for the struggling Greek economy.

In the past the EU offered concessions to voters having rejected EU treaties, however this time there is little political will, and not only in Germany, to offer sweeteners to the Greeks to help them swallow the bitter pill of fiscal adjustment.

Why then are the Greeks fighting against the support from the EU? And should the rest of the EU let them resist or should they be offered a sweeter deal after all?

 Read more

Alan Beattie

So says, well, the IMF in the staff report produced as fodder for the executive board to OK a €28bn loan to Athens on Thursday.

Not only is the Greek programme itself on a knife-edge – super-sensitive to yet more growth shortfalls, doubts over political commitment to implementation, the usual – but the Fund is close to the limits of its own flexibility on how much it can lend to a single country, under its snappily-named “exceptional access” criteria. Read more

Alan Beattie

The euro has fallen to a 16-month low below $1.27 – run, run for your lives! Or recognise that it’s still around the trade-weighted average for the past decade and only slightly weaker in real terms than when it launched, that a weaker currency is just what a stricken economy needs and that there isn’t much sign that the fall is disorderly and hence generally hitting confidence in eurozone assets. (The eurozone authorities are doing that.) Read more

Tom Burgis

A tram passes the euro sign sculpture in front of the European Central Bank ( ECB) in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg

Welcome to our continuing coverage of the eurozone crisis. All times are GMT. By Tom Burgis, James Crabtree and John Aglionby on the news desk in London, with contributions from FT correspondents around the world.

The turmoil in the eurozone has taken a troubling turn in recent days, with anxiety spreading from Europe’s periphery to its “core” countries. Even as Italy’s Mario Monti readies his economic agenda to be presented today, investors are looking at France, the Netherlands and Austria with increasing unease and wondering whether the ECB might yet ride to the rescue. Over in Greece, today is the anniversary of 1973′s mass student protests – with demonstrators once more planning to take to the streets. And the bond markets are showing ever more strain, with today’s Spanish bond auction souring sentiment still further. Read more