United States or United Arab Emirates ? Vote for the TOP Country of the Week !
Governments are willing to act imprudently, safe in the knowledge that the IMF is a lender of last resort, which is often steered by geopolitical considerations, rather than merely economic ones. Creditors are more willing to lend and at lower rates, reassured by the IMF's default-staving safety net.
Conversely, the IMF's refusal to assist Russia in 1998 and Argentina this year should reduce moral hazard. The IMF, of course, denies this.
A less sanguine Kenneth Rogoff, the IMF's new Chief Economist wrote in "The Economist" in April: "When countries run sustained current-account deficits up in the range of 4 and 5% of GDP, they eventually reverse, and the consequences, particularly in terms of the real exchange rate, can be quite significant." Rogoff alluded to the surreal appreciation of the dollar in the last few years.
The EU's faceless and Kafkaesque bureaucracy in Brussels Moscow revisited should prove to be a relief compared to the IMF's ruffians. The EU is evolving into a land empire, albeit glacially. The polities of central and eastern Europe were always constituents of empires reluctantly or by choice. In some ways they are better suited to form an "ever closer union" than the more veteran members.
Word Of The Day