Upshot of IMF's Self-Audit: It's Completely Dysfunctional When It Comes To Europe

That is difficult to square with everything we know about the fateful decision not to restructure Greece's debt. IMF staff favoured restructuring, but the European commission and the ECB, which put up two-thirds of the money, ultimately had their way. He who has the largest wallet speaks with the loudest voice. In other words, there are different roads to "consensus".

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The implication is that the IMF should not participate in a programme to which it contributes only a minority share of the finance, but expecting it to provide majority funding implies the need to expand its financial resources. This is something that the IEO report evidently regarded as beyond its mandate -- or too sensitive -- to discuss.

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In its programmes for Greece, Ireland and Portugal, however, it and the central bank demanded conditions of the government. This struck more than a few people as bizarre. It would have been better if, in 2010, the IMF had demanded of the ECB a pledge "to do whatever it takes" and a programme of "outright monetary transactions" such as those the ECB president, Mario Draghi, eventually offered two years later. This would have addressed the contagion problem that was one basis for European officials' resistance to a restructuring of Greece's debt.

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It would be better to allow an independent management team to make decisions free of political interference, in the manner of a central bank policy committee. This, however, presupposes freeing the IMF from dependence on financial contributions from its regional stakeholders. It also requires its management to demonstrate that it can consistently make decisions based on programme countries' economic interest, not on the political preferences of powerful national shareholders.