Last weeks IMF/World Bank meetings in Tokyo highlighted the fact the austerity measures being forced upon countries are not working.
IMF Managing Director Christine Legarde used the week to set out a ‘moderated’ position emphasising growth and giving Greece more breathing space – which immediately brought her into conflict with Germany’s finance minister Wolfgang Schaeuble, who insisted there was “no alternative” to budget slashing.
They had to paper over the cracks, both insisting they were on the same page, Schaeuble telling reporters:
“We are in complete agreement with the IMF and especially with Ms Lagarde, that in a mid-term view the reduction of too-high debt levels is completely unavoidable.”
So that’s ok then?
For trade unions worldwide Sharan Burrow, General Secretary of the ITUC, stated:
“The annual meetings of the IMF and World Bank confirmed what the ITUC and trade unions around the world have been saying for more than two years – the idea that you can create ‘growth through austerity’ is an illusion that has destroyed million of people’s livelihoods.”
Before last week’s meetings, the IMF’s chief economist revealed the Fund had seriously underestimated the impact of budget-cutting austerity measures on national economies, apparently due to using an incorrect “multiplier” in their economic models.
However, the final communiqué of the IMF’s ministerial committee asserted only emerging-market economies, not industrialised countries, should “use policy flexibility to support growth”, even though ten European economies are expected to be in recession in 2012.
To which Burrow responded:
“It is incomprehensible for the IMFC to tell Europe to pursue structural adjustment and fiscal austerity, even though it is in recession, while only countries that are already enjoying growth are encouraged to support pro-growth policies.
“It seems evident that this totally incoherent approach came from some industrialised country governments that have obviously not learned the lessons of the IMF’s research revisions.”