The International Monetary Fund (IMF), a multilateral lender of last resort, is known for imposing tough economic measures on the countries it has assisted in the past.
Yet when it comes to aiding shareholder countries like Europe, the IMF has been a little lax and needs to add teeth to its lending terms like it does in the developing world, says Mohamed El-Erian, CEO of Pimco, the world's largest bond fund.
"There is no denying that too many of the adjustment programs it has overseen have fallen short of their objectives. Whether it jumped or was pushed, the institution sacrificed some of its own rules, including those previously deemed sacrosanct," El-Erian writes in a Financial Times column.
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For two years, El-Erian says, the IMF agreed to a series of programs that "were partially designed, inadequately funded and, in some cases, even threatened its preferred creditor status."
(Associated Press photo)
That could spell trouble for the institution down the road if the world perceives it to coddle nations that account for its funding.
“The IMF must find the courage to resist European bullying; and the rest of the world must help by making a collective effort to accelerate reform of the institution’s governance and representation," he wrote. "Only then would an enhanced IMF be able to help the global economy back to growth and jobs.”
European countries have arranged $195 billion in loans for the IMF to use to aid ailing countries in the periphery, such as Greece.
That figure falls short of a $200 billion target, as the U.K. said it would not participate in the financing package in protest over European calls for taxes on financial transactions like stock trades, which London views as unacceptable.
European leaders, meanwhile, have called on other countries to help make up the shortfall.
"The EU would welcome G-20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources so as to fill global financing gaps," says Eurozone Chief Jean-Claude Juncker, according to the AFP newswire.
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