I’m a bit nervous about getting into a fight with the Vreelander (his decapitation move has to be seen to be believed). But this claim:
bq. There are a lot of folks in Ireland who were not so keen on joining the eurozone to begin with, so there is going to be a backlash in popular sentiment for Europe in Ireland. By bringing in the IMF to crack the whip, Germany, the United Kingdom, and the rest of Europe can allow the Fund to do the dirty work. It will be the IMF that officially monitors the Irish government and deems whether its fiscal adjustment is sufficient to warrant continued disbursements of the loan package. While the Managing Director of the IMF, Dominique Strauss-Kahn, may come from the Socialist Party of France and talk a good pro-stimulus game, in the end, the IMF Executive Board will have the final say. And when it comes to Europe, the Board is likely to take its lead from prominent members like Germany, the United Kingdom, and France. Behind the closed doors of the IMF Executive Board, these countries can make the tough calls for austerity in Ireland.
seems to be at odds with how the early stages of the bailout are proceeding. See this “Financial Times piece:”:http://www.ft.com/cms/s/0/9c09aa1a-f2f3-11df-9514-00144feab49a.html#axzz16DNXuwY9
bq. One small consolation for the Irish is that, if it had been up to the European Central Bank, the measures would have been even more severe. According to people familiar with recent discussions between the IMF, European experts and the Irish government, the ECB wanted an austerity programme several billion euros bigger than €15bn. It was the IMF that argued for a lower figure in the name of promoting economic growth, they said.
Jim is right to point to the differences between the Strauss-Kahn/Blanchard crowd and the IMF’s Executive Board. And it may be that the dynamics he points to are going to come into play during the monitoring process. But if the IMF is going up _mano a mano_ against the ECB in a fight to see who can out-austere the other, I’d put my money on the ECB. The IMF may be indirectly responsible to Germany, the United Kingdom and France, but the US – which has been quietly expressing its displeasure with the EU’s hairshirts-for-everyone approach to fiscal retrenchment will have some say too, even if it is going to be reluctant to wade too obviously into intra-European fights. And the ECB, whatever the nominal voting system might suggest, is in practice beholden only to Germany, Germany and Germany. The German government is not keen on spending tax-payer money on bailing out perceived profligates. And its lack of enthusiasm is sharply reinforced by the German Constitutional Court at Karlsruhe, which has been hinting strongly that any ‘transfer union’ without stark penalties will be deemed unconstitutional. My prediction is that the IMF is – and will continue to be – a leavening influence on the preference of the ECB and Germany for rigid enforced austerity. We’ll see what happens.