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Senior IMF Economist Resigns, Cites Suppression & Europe Bias
A senior International Monetary Fund economist is resigning from the Fund, writing a scathing letter to the board blaming management for suppressing staff warnings about the financial crisis and a pro-European bias that he says has exacerbated the euro-zone debt crisis.
“The failure of the fund to issue [warnings] is a failing of the first order, even if such warnings may not have been heeded,” Peter Doyle said in a letter dated June 18 and copied to senior management.
Doyle is formerly a division chief in the IMF’s European Department responsible for non-crisis countries. He currently acts as an adviser to the Fund but is expected to officially leave in the fall.
“The consequences include suffering [and risk of worse to come] for many including Greece, that the second global reserve currency is on the brink, and that the Fund for the past two years has been playing catch-up and reactive roles in the last-ditch efforts to save it,” he said in the letter.
Mr. Doyle’s shift in positions at the fund–from division chief to adviser–occurred around the same time that a new European Department chief was appointed. A senior official at the IMF said the new chief restructured the department, replacing many of its staff from outside the department earlier.
“After twenty years of service, I am ashamed to have had any association with the Fund at all,” he said in the letter. Mr. Doyle wasn’t immediately available for further comment.
IMF spokesman Bill Murray said some of the substance of Mr. Doyle’s remarks “are well documented in the public record,” including in reports by the IMF’s Office of the Independent Auditor and comments by IMF Managing Director Christine Lagarde.
Last year, the independent fund auditor said the IMF failed at one of its most basic tasks–acting as the world’s economic watchdog–ahead of the global financial crisis. In a separate report, the auditor said IMF staff have often felt pressure to align their conclusions with IMF views.
Ms. Lagarde said early in her tenure that she planned to heed the auditor’s warnings.
But the auditor hasn’t yet filed a report to follow up on whether the management has effectively addressed its concerns.
“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,” Mr. Doyle said.
Europe’s influence within the IMF, which is supposed to act as an independent assessor of the global economy, has been criticized repeatedly as overly strong. Many economists say the IMF hasn’t treated Europe with the same tenacity and aggressive policy prognosis as it has emerging markets, such as in the Asian and Latin American financial crises in the previous decades. For example, some economists believe the IMF should have urged a restructuring of Greek debt much earlier, but acquiesced in the face of strong opposition with EU’s power circles. If Greek debt had been restructured at an earlier stage, those economists say, Europe may have been able to stem its crisis.
The appointment of another European to manage the fund, affirming a seven-decade convention, is also used as evidence of a pro-European bias.
Mr. Doyle pointed to former French finance minister Lagarde’s posting in his letter.
“Even the current incumbent is tainted, as neither her gender, integrity, or elan can make up for the fundamental illegitimacy of the selection process,” he wrote.
The IMF’s reputation came under serious fire last year after the last managing director,Dominique Strauss-Kahn, was arrested for allegedly raping a hotel maid in New York. Prosecutors later dropped the charges, but he still faces civil proceedings in the U.S. in regards to the incident, as well as being under investigation in France for an alleged gang rape and involvement in an alleged prostitution ring.
Separately, a French court launched an investigation into whether Ms. Lagarde was complicit in any alleged misuse of public funds in 2008, when she was France’s finance minister. Ms. Lagarde has denied any wrongdoing.
Furthermore, Mr. Strauss-Kahn’s predecessor, Rodrigo de Rato, was named earlier this month by Spain’s national court in a criminal probe into last year’s stock-market listing of Bankia SA.