Should IMF Have Been Called In?

The IMF has had a good crisis so far. It was nimble in action. The Pittsburgh meeting of the G-20 aspired to a new era of crisis management, with the IMF playing an enhanced role in surveillance and providing international insurance. Now the next crisis is upon us, and it’s all about sovereign European debt. Spreads on Greek sovereign debt have shot up, spurred by the revelation that the size of the government deficit is really 13% (the numbers had been fiddled before) alongside concerns over structural weaknesses. Market concerns have spread to Portugal and Spain, with Ireland and Italy—the other members of the so-called PIIGS—also under watch. Afraid that this could get nasty, EU members, on Thursday, reportedly agreed on a rescue package for Greece. But they chose not to call in the IMF. This is not for lack of awareness. In early 2009, the IMF national surveillance mission was raising alarm bells over Greece’s unsustainable public finances. So what’s the problem?