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Thursday, June 21, 2012 9:35 PM

Lagarde Shows True Colors

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The Financial Times says IMF challenges Berlin’s crisis response

The International Monetary Fund on Thursday challenged Berlin’s game plan for pulling the eurozone out of its crisis by advocating a series of short-term fixes that the German government has resisted.

Christine Lagarde, the IMF chief, said eurozone leaders needed to prevent the single currency from deteriorating further by considering the resumption of bond buying by the European Central Bank and pumping bailout money directly into teetering banks.

While Germany has resisted such measures, Ms Lagarde said the IMF was concerned about “additional tension and acute stress” in both the European banking sector and peripheral governments. She warned that the long-term measures being considered by EU leaders ahead of a summit next week were not enough.

“The IMF believes that a determined and forceful move towards complete European monetary union should be reaffirmed in order to restore faith in the system because we see at the moment, the viability of the European monetary system is questioned,” Ms Lagarde said.

In addition to the short-term measures, Ms Lagarde also called on the eurozone to complete a fiscal and banking union in the longer-term, structures that she said should include a eurozone-wide bank deposit guarantee scheme and “gradual but limited” mutualisation of eurozone sovereign debt – both measures also resisted by Berlin.

Ms Lagarde said that while the IMF consulted several EU institutions in its three-week evaluation, it did not run its recommendations by Berlin.

“We did not go into each and every member state’s political position,” she said.
True Colours

In case you were looking for Lararde's true colours (colors if you prefer), here they are.

There certainly was no need for Lagarde to consult Berlin. After all, France's position is all that matters.

Mike "Mish" Shedlock
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